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Our sales for the quarter were $288 million. Excluding favorable currency translation, our organic growth was up 45% from the prior year. Focusing on EV, last quarter, we reported that sales into EV applications were 13% of consolidated sales. This quarter, EV sales were 16% of consolidated sales and we continue to expect that number to be in the mid-teens for fiscal 2022. We have ample liquidity, which also allows us to execute our stock buyback program, under which we purchased $7.6 million of shares in the quarter, and to pay our dividend, which rose from $0.11 to $0.14 per share in the quarter. The awards identified here represent some of the key businesses -- business wins in the quarter and represent over $30 million in annual business at full production. First quarter sales were $287.8 million in fiscal year '22 compared to $190.9 million in fiscal year '21, an increase of $96.9 million or 50.8%. The year-over-year quarterly comparisons include a favorable foreign currency impact on sales of $10.3 million in the current quarter. The increase was mainly due to lower sales in the prior year quarter from the impact of the COVID-19 pandemic and to higher sales of electric and hybrid electric vehicles, which amounted to 16% of sales in the first quarter of fiscal year '22, which was in line with our previous communication that electric vehicles and hybrid electric vehicle sales would comprise mid teens of our fiscal year '22 consolidated sales. First quarter net income increased $8.4 million to $29.1 million or $0.76 per share diluted from $20.7 million or $0.54 per diluted share in the same period last year. Fiscal year '22 first quarter margins were 24.9% as compared to 23.6% in the first quarter of fiscal year '21. The negative impact of the supply disruption and higher logistics costs, including freight, on the first quarter of fiscal year '22 gross margin was nearly 300 basis points. First quarter selling and administrative expenses as a percentage of sales decreased to 11.4% compared to 13.9% in the fiscal '21 first quarter. First, income tax expense in the first quarter of fiscal year '22 was $5.7 million or 16.4% as compared to a net tax benefit of $5.1 million in the first quarter of fiscal year '21. The effective tax rate was lower in the first quarter of fiscal year '21 due to discrete tax benefits of $7.8 million in the quarter or $0.20 per diluted share. Without the discrete tax benefits, the effective rate would have been 17.2%. The year-over-year tax expense increase was $10.8 million. Second, other income net was lower by $1.6 million, mainly due to lower international government assistance between the comparable quarters. Fiscal year '22 first quarter EBITDA was $48.5 million versus $29.3 million in the same period last fiscal year. For fiscal year '22 first quarter free cash flow was a negative $6.2 million as compared to a positive $4.8 million in the first quarter of fiscal year '21. In the first quarter of fiscal year '22, we invested approximately $15.9 million in capex as compared to $11.6 million in the first quarter of fiscal year '21. The higher first quarter capex is in line with our expectation that capex in fiscal year '22 would be higher than the investment in the prior year estimated to be in the range of $53 million to $57 million. In the first quarter of fiscal year '22, we reduced gross debt by $4.7 million. Since our acquisition of Grakon in September 2018, we reduced gross debt by nearly $123 million. First, on March 31st, we announced the $100 million share repurchase program, which we executed $7.6 million of repurchases during the first quarter of fiscal year '22. Since the authorization's approval, we have purchased $15.1 million worth of shares at an average price of $46.45. In addition, we increased our quarterly dividend from $0.11 to $0.14 per quarterly share, an increase of 27%. We ended the first quarter with $207.9 million in cash. The revenue range for the full fiscal year '22 is between $1.175 billion to $1.235 billion. Diluted earnings per share range is between $3.35 to $3.75 per share.

First quarter sales were $287.8 million in fiscal year '22 compared to $190.9 million in fiscal year '21, an increase of $96.9 million or 50.8%. First quarter net income increased $8.4 million to $29.1 million or $0.76 per share diluted from $20.7 million or $0.54 per diluted share in the same period last year. The revenue range for the full fiscal year '22 is between $1.175 billion to $1.235 billion. Diluted earnings per share range is between $3.35 to $3.75 per share.

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In the first quarter, we delivered 4% revenue growth underpinned by market share gains in ATMs and self-checkout solutions. I'll provide additional color about key market trends in just a minute, but I'll simply say that our growth in Q1 gives us the confidence to reiterate our 2021 revenue outlook of $4 billion to $4.1 billion. To date, the main contributor has been our DN Now work streams, which includes services modernization, G&A efficiencies from enhancing our digital and cloud-enabled capabilities and selling a higher mix of self-checkout devices and DN Series ATMs. The company is off to a good start in Q1, and we're tracking to our previously disclosed plan of $160 million of gross savings this year. Our outlook for 2021 is a range of $140 million to $170 million or approximately 30% of our adjusted EBITDA. These trends drove retail revenue growth of 11% in the quarter, excluding the impact of divestitures and currency. During the quarter, we secured a multi-year agreement with the French retail group, Les Mousquetaires, to transform the checkout experience at nearly 2,000 stores with next generation point-of-sale and self-checkout products, our AllConnect Data Engine and dynamic self-service software. We're seeing growing evidence of market share gains due to the advanced features and functionality of our next generation DN Series ATMs. In the United States, we're seeing gains among larger financial institutions, including an initial order to deliver DN Series cash recycling ATMs and maintenance services at a top 10 U.S. financial institution, which previously bought hardware from others. With this wining [Phonetic], we received DN Series orders from five of the top 10 U.S. banks and we see opportunities to add to our success. In Latin America, we're seeing DN Series orders from customers in Mexico, Colombia, Peru and Honduras, including a contract with Banco Nacional de Mexico, or Banamex, to deliver approximately 1,200 DN Series ATMs, Vynamic software licenses and maintenance services. For legacy ATMs, we're seeing service cost reductions of approximately 20%. We increased the number of machines connected to ACDE by 10% sequentially during the first quarter. As we connect more devices to AllConnect Data Engine, we expect the operational efficiencies will add to our service margins and contribute to our target range of 32% to 33%. Beyond our growing pipeline, our managed services success in the quarter included a five-year contract to be the sole source supplier for maintenance, monitoring and help desk services for more than 4,000 self-service terminals and in a top five bank in the United Kingdom. And, thirdly, a three-year managed services contract extension covering more than 3,500 self-service terminals with HSBC, the largest bank in Hong Kong. Adjusted EBITDA of $100 million was the highest first quarter in the company's history and while Jeff will discuss the details, I'm especially pleased that our operating profit growth of 25% and adjusted EBITDA growth of 12% significantly outpaced our top line growth of 4%. Total first quarter revenue of $944 million reflects foreign currency benefits of $34 million versus the prior-year period, partially offset by $23 million headwind from divested businesses. Adjusted for foreign currency and divestitures, revenue increased 2.4% led by product growth of 11%, software growth of 7%, and a services decline of 4%. We generated $273 million of non-GAAP gross profit in the quarter, an increase of $19 million or 7% versus the prior year period, reflecting higher revenue and improving margins from our DN Now achievements. Gross margin increased 110 basis points to 29%. We've expanded gross margins across all three segments, led by strong gains in software and services of approximately 590 basis points and 220 basis points, respectively. Product gross margins declined 200 basis points, due primarily to non-recurring benefits in the prior year period and a slightly less favorable customer mix. Operating profit increased $16 million or 25% versus the prior quarter, while operating margins gained 150 basis points to 8.4%. R&D expense was $3 million higher year-over-year, due to planned growth investment. We delivered adjusted EBITDA of $100 million in the quarter, which increased $11 million or 12% over the prior year. On Slide 6, Eurasia Banking revenue of $328 million, increased 5% versus the prior year period excluding the foreign currency benefit of $21 million and a $20 million impact from divestitures. Segment gross profit increased $7 million year-over-year with contributions from all three business lines. Foreign currency benefits of $8 million were partially offset by interim cost benefits from the prior year. Gross margin expanded 60 basis points year-over-year led by software and services improvements, while product margins declined due to a less favorable customer mix. Moving to Slide 7, Americas Banking revenue of $312 million declined 7% versus the prior year, excluding a $6 million foreign currency headwind and a $2 million divestiture headwind. Segment gross profit of $97 million was down $7 million year-over-year due to lower volume and modest currency and divestiture headwinds. Gross margin expansion of 100 basis points to 31.3% was driven by benefits from DN Now initiatives. On Slide 8, retail revenue of $304 million increased 11% year-over-year after adjusting for $19 million foreign currency tailwind and the divestiture headwind of $1 million. When compared to the prior year period, retail gross profit increased 32% and $79 million, due primarily to revenue growth. Gross margin expanded 260 basis points, demonstrating that our team is doing a great job delivering positive operating leverage, revenue growth, a more favorable mix of self-checkout solutions and continued execution of DN Now initiatives. Free cash flow use of $70 million in the quarter was up slightly compared with the prior year quarter and was in line with our internal plan. On an unlevered basis, free cash flow use improved from $30 million to $10 million year-over-year due to higher profits and lower restructuring events. For modeling purposes, investors should expect our cash interest payments to be approximately $30 million in the second and fourth quarters and approximately $60 million in the third quarter of 2021. When compared with year-end, the company's cash balance reflects seasonal cash use for us approximately $30 million used to pay down a portion of the revolving credit facility. The company ended the quarter with $573 million of total liquidity, including $260 million of cash and short-term investments. At the end of the quarter, the company's leverage ratio of 4.4 times was unchanged versus year-end and down one-tenth of the term from the year ago period. We expect to generate revenue of $4 billion to $4.1 billion, which equates to 3% to 5% annual growth. Our adjusted EBITDA range is $480 million to $500 million for the year, or 6% to 10% growth as we benefit from topline growth and operating leverage. Operating expense for the second quarter is expected to be in line with the first quarter or approximately $194 million, although it could be slightly higher if the euro continues its strength against the U.S. dollar. We continue to expect $140 million to $170 million of positive cash flow for 2021, including up to $50 million for DN Now restructuring payments. Our outlook reflects a material improvement in the company's EBITDA, to free cash flow conversion rate from 12% in 2020 to approximately 30% in 2021.

In the first quarter, we delivered 4% revenue growth underpinned by market share gains in ATMs and self-checkout solutions. I'll provide additional color about key market trends in just a minute, but I'll simply say that our growth in Q1 gives us the confidence to reiterate our 2021 revenue outlook of $4 billion to $4.1 billion. Adjusted EBITDA of $100 million was the highest first quarter in the company's history and while Jeff will discuss the details, I'm especially pleased that our operating profit growth of 25% and adjusted EBITDA growth of 12% significantly outpaced our top line growth of 4%. Adjusted for foreign currency and divestitures, revenue increased 2.4% led by product growth of 11%, software growth of 7%, and a services decline of 4%. We expect to generate revenue of $4 billion to $4.1 billion, which equates to 3% to 5% annual growth.

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We achieved depletions growth of 26% in the fourth quarter and 37% for the full year. In 2020, Truly increased its market share in measured off-premise channels from 22 points to 26 points and was the only national hard seltzer, not introduced in 2020, to grow share. Based on information in hand, year-to-date depletions reported to the company through the 6 weeks ended February 6, 2021 are estimated to increase approximately 53% from the comparable weeks in 2020. For the fourth quarter, the reported net income of $32.8 million or $2.64 per diluted share, an increase of $1.52 per diluted share or 136% from the fourth quarter of last year. Shipment volume was approximately 1.94 million barrels, a 54% increase from the fourth quarter of 2019. The Company believes distributor inventory as of December 26, 2020 averaged approximately 5 weeks on hand and was at an appropriate level, based on supply chain capacity constraints and inventory requirements to support the forecasted growth. Our fourth quarter 2020 gross margin of 46.9% decreased from the 47.4% margin realized in the fourth quarter of last year, primarily as a result of higher processing costs due to increased production at third party breweries, partially offset by cost saving initiatives at Company-owned breweries and price increases. Fourth quarter advertising, promotional and selling expenses increased $48.1 million from the fourth quarter of 2019, primarily due to increased investments in media and production, increased salaries and benefits costs and increased freight to distributors because of higher volumes. General and administrative expenses were flat from the fourth quarter of 2019, primarily due to non-recurring Dogfish Head transaction-related expenses of $2.1 million incurred in the comparable 13-week period of 2019, partially offset by increases in salaries and benefits costs. Our full-year net income per diluted share of $15.53 increased $6.37 or 70% compared to the prior year. Our full-year 2020 shipment volume was approximately 7.37 million barrels, a 38.8% increase from the prior year. Based on information of which we are currently aware, we are targeting 2021 earnings per diluted share of between $20 and $24, but actual results could vary significantly from this target. This projection excludes the impact of ASU 2016-09. We are currently planning increases in shipments and depletions of between 35% and 45%. We're targeting national price increases per barrel of between 1% and 2%. Full year 2021 gross margins are currently expected to be between 45% and 47%, a decrease from the previously communicated estimate of between 46% and 48%. We plan increased investments in advertising promotional and selling expenses of between $120 million and $140 million for the full year 2021, a decrease from the previously communicated estimate of between $130 million and $150 million, not including any increases in freight costs for the shipment of products to our distributors. We estimate our full-year 2021 effective tax rate to be approximately 26.5%, excluding the impact of ASU 2016-09. We are not able to provide forward guidance on the impact of ASU 2016-09 will have on our 2021 financial statements and full-year effective tax rate, as this will mainly depend upon unpredictable future events including the timing and value realized upon exercise of stock options versus the fair value of those options were granted. We are continuing to evaluate 2021 capital expenditures and currently estimate investments of between $300 million and $400 million.

For the fourth quarter, the reported net income of $32.8 million or $2.64 per diluted share, an increase of $1.52 per diluted share or 136% from the fourth quarter of last year.

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We achieved 6.8% top-line net sales growth for the quarter over a strong first quarter comparison last year. It offers 2,000 pounds of towing capacity, 25% more cargo capacity than the competition, and leverages our broad product offerings with an integrated BOSS snowplow amount. We grew overall consolidated net sales to $932.7 million, an increase of 6.8% compared to the first quarter of last year. Reported and adjusted earnings per share were about $0.66 per diluted share, down from $1.02 and $0.85, respectively in the first quarter a year ago. Professional segment net sales for the quarter were up 3.5% to $672.9 million. Professional segment earnings for the first quarter were $93.3 million and one expressed as a percent of net sales 13.9%. This was down from 18% in the first quarter last year. Residential segment net sales for the first quarter were $255.4 million, up 17.3% over last year. Residential segment earnings for the quarter were $31.8 million, and when expressed as a percent of net sales 12.4%. This was down from 14.7% in the first quarter last year. We reported a gross margin of 32.2% for the quarter, compared to 36.1% in the same period last year. SG&A expense as a percent of net sales for the quarter was 22.4%, compared to 19.9% in the same period last year. Operating earnings as a percent of net sales for the first quarter were 9.8%, compared to 16.2% in the same period last year. Adjusted operating earnings as a percent of net sales for the quarter were 9.9%, compared to 14.2% in the same period a year ago. Interest expense for the quarter was $7 million down slightly from the same period last year. The reported adjusted effective tax rates for the first quarter were 20.2% and 20.9%, respectively, compared to 18.1% and 21.5% in the same period a year ago. Accounts receivable were $366 million, up 19% from a year ago, primarily driven by higher sales and customer mix. Inventory was $832 million, up 23% compared to last year. Accounts payable increased 30% from last year to $474 million. Free cash flow in the quarter was a $102 million use of cash. These priorities are highlighted by our actions including our plan to deploy $150 million to $175 million in capital expenditures this year to fund capacity, productivity, and new product investments. In our acquisition of Intimidator Group in January, our return of $106 million to shareholders this quarter was 75 million in share repurchases and 31 million in regular dividends. Our gross leverage to EBITDA target remains the same in the range of 1 to 2 times. We now expect net sales growth in the range of 12% to 14%, which reflects the partial year addition of the Intimidator Group, pro-rata over the remaining three quarters. Along with the continued expectation for 8% to 10% growth for the remainder of our business. The acquired business is reported under the professional segment, and as a result, we expect professional net sales growth at the upper end of the 12% to 14% range for the full year. In light of the recent geopolitical events, we are holding our full year-adjusted diluted earnings per share guidance in the range of $3.90 to $4.10. Additionally, for the full year with the acquisition included, we now expect interest expense to be about $35 million. Depreciation and amortization to be about $120 million and free cash flow conversion in the range of 80% to 90% of reported net earnings. We continue to estimate an adjusted effective tax rate of about 21%. As we head into the remainder of fiscal 2022 demand remains strong across the markets we serve, the ongoing replacement cycles for our products provide a steady foundation and we are keeping an eye on the following areas, consumer and business confidence, together with inflation, geopolitical developments, and COVID-19 variants, customer prioritization of investments to maintain and improve outdoor environments, regulations, on reduced emissions, and customer preference for sustainable products, the continuation of strong momentum in golf markets and government support and funding of infrastructure projects, including the $1 trillion US infrastructure legislation. In the Us golf rounds played were up 5.5% in 2021. On top of a 13.9% increase in 2020. Not far from the golf show was Super Bowl 56 SoFi Stadium in Inglewood, California.

We grew overall consolidated net sales to $932.7 million, an increase of 6.8% compared to the first quarter of last year. Reported and adjusted earnings per share were about $0.66 per diluted share, down from $1.02 and $0.85, respectively in the first quarter a year ago. We now expect net sales growth in the range of 12% to 14%, which reflects the partial year addition of the Intimidator Group, pro-rata over the remaining three quarters. The acquired business is reported under the professional segment, and as a result, we expect professional net sales growth at the upper end of the 12% to 14% range for the full year. In light of the recent geopolitical events, we are holding our full year-adjusted diluted earnings per share guidance in the range of $3.90 to $4.10.

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Starting with the significant and unfamiliar task of efficiently closing and then swiftly reopening our entire fleet of nearly 1,500 retail locations, some of them multiple times. Capitalizing on the accelerated shift to online spending, achieving record digital revenue of $450 million, an increase of almost 75% year over year while also fueling record profitability for this channel, driving record conversion rates in stores, helping us to partially offset the impact from lower traffic levels and store closures. Conserving capital and reducing operating expenses by 15% compared with fiscal '20, generating cash flow of over $130 million to ensure healthy liquidity. New website visitors were up 40%, contributing an almost 50% growth in new customer purchases, and we delivered another strong quarter of this digital growth with comps up 55%. The combination of these factors led to a total revenue decrease of 6% versus last year, with stores open about 90% of the possible days in the quarter. This result was better than we expected due mainly to the stronger store sales at Journeys and that represents a meaningful improvement from last quarter's 11% decline in Q2's 20% decline. Fortunately, with best-in-class digital abilities, Schuh was able to capture a significant portion of lost store volume through its digital channel, and total sales were down only 13%, capping off a year in which Schuh, like Journeys, gained market share. For the upcoming year, J&M has focused 90% of new product development on our expansion of its casual offering to include casual athletic, leisure, rugged, outdoor and performance. A higher tax rate offset the higher operating income, resulting in adjusted earnings per share of $2.76, compared to $3.09 last year. While comps were up 1%, consolidated revenue was $637 million, down 6% compared to last year, driven by continued pressure at J&M and the impact from store closures during the quarter. A robust e-commerce comp of 55% was really offset by a decline in-store revenue of 19%, driven by a comp decline of 10%. While our stores were closed for 10% of the possible operating days during the quarter. Digital sales increased to 27% of our retail business from 17% last year. Consolidated gross margin was 45.8%, down 110 basis points from last year. As we have experienced all year, increased shipping to fulfill direct sales that pressured the gross margin rate in all our businesses totaling 80 basis points of the overall decline. Notably, Journeys' gross margin increased 210 basis points driven by lower markdowns. Schuh's gross margin decreased 410 basis points due to the increased e-comm shipping expense. J&M's gross margin decrease of 1,690 basis points was due to more closeouts at wholesale, higher markdowns at retail and incremental inventory reserves. So, finally, the combination of lower revenue at J&M, typically the highest gross margin rate of our businesses and the revenue growth of licensed brands typically our lowest gross margin rate negatively impacted the overall mix by 50 basis points. The largest year-over-year savings came from the occupancy costs, driven in large part by the execution of about $18 million of rent abatements with our landlord partners who provided support for the time stores were closed and savings from the U.K. government program, which provides property tax relief. We took the most significant cost actions at J&M evident by the 29% reduction in SG&A in the Q4 and our 25% reduction for the full year. We negotiated 123 renewals this year and achieved a 23% reduction in cash rent or 22% on a straight-line basis in North America. This was on top of an 11% of cash rent reduction or 8% on a straight-line basis for 160 renewals last year. These renewals are for an even shorter-term averaging approximately one and a half years compared to the three-year average that we saw last year, with almost one-third of our fleet coming up for renewal in the next 24 months, this will remain a key priority for us going forward. In summary, the fourth quarter's adjusted operating income was $64.7 million versus last year's $59.3 million. Our adjusted non-GAAP tax rate for the fourth quarter was 37.5%. Tax initiatives under the CARES Act and then other provisions generated a onetime $65 million permanent income tax benefit for Fiscal year-end '21. Q4 total inventory was down 20% on sales that were down 6%. For the fourth quarter, our ending net cash position was $182 million, $100 million higher than the third quarter's level, driven by strong cash generation from operations. Capital expenditures were $6 million as our spend remains focused on digital and omnichannel and depreciation and amortization was $11 million. We closed 16 stores and opened none during the fourth quarter, capping off the full year in which we closed 33 stores and opened 13. Directionally, the overall sales decline for Q1 compared to fiscal-year end '20 could be in the neighborhood of the 11% decline we experienced in the past third quarter. Gross margin rates for Q1 will be below fiscal '20 levels, more than that 210 basis point decline we experienced this past third quarter. However, there will be some deleveraging due to the sales volume likely in the neighborhood of 100 basis points. Combined with the seasonality of our business, we are expecting more than 100% of our full year earnings to also come from the third and fourth quarters. The annual tax rate is expected to be approximately 32%. For fiscal '22, capital expenditures will be between $35 million and $40 million and centered on digital and omnichannel investments, which comprised about 75% of this amount. This does not include another $16 million net of tenant allowance related to the move to a new headquarters location, which were delayed because of the pandemic. We estimate depreciation and amortization at $48 million. We currently plan to open up to 15 new stores, mainly at Journeys. We currently plan on closing about 35 stores, but discount could go up or down based on our ability to obtain short-term lease deals at attractive rents. For this year, we are assuming an average of 14.6 million shares outstanding this assumes no stock buybacks under our current $100 million Board authorization, of which $90 million is remaining. Initially, we believe we can reduce operating expenses by as much as around $25 million to $30 million, approximately 3% on an annualized basis. Levi's is one of the most recognized consumer brands with our heritage dating back almost 170 years. While we doubled e-commerce in the five years leading up to the pandemic, we aim to double the business again in a much shorter period by leveraging the 75% comp increase we achieved last year. And to do this, in North American stores, we're launching the initial rollout of BOPUS, an offering we've had in the U.K. that drives around 20% of Schuh's online purchases and steers customer traffic to its stores.

A higher tax rate offset the higher operating income, resulting in adjusted earnings per share of $2.76, compared to $3.09 last year. While comps were up 1%, consolidated revenue was $637 million, down 6% compared to last year, driven by continued pressure at J&M and the impact from store closures during the quarter.

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With our land and expand strategy that has worked for the better part of 15 years, our focus has mainly been on the first part of that, adding advisors and accounts to the platform in ways they want to be served by us by investment. Today, we have more than 103,000 financial use advisors using the Envestnet wealth technology. Those advisors oversee more than 12 million accounts with $3.8 trillion assets supported by our platform. We now have over 200 integrations, and we continue to see success in renewing, expanding and cross-selling existing enterprise relationships, while we're also establishing new ones. Recently, a client of ours, Citizens Bank, signed an additional schedule for unlimited retirement block use for approximately 4,000 personal bankers and on their public website for consumers to access directly. Sales to independent advisors, those who are not associated with a large broker-dealer or enterprise, were up 23% in the second quarter over last year. The number of advisors who are using our tax and impact overlay solutions grew 16% since just this past December, and overlay accounts grew 19%. Advisers using these solutions are up 12% and impact portfolio accounts are up 18% since the end of just last year. Quantitative portfolios, our first direct indexing solution, also experienced higher usage, with 23% more advisors using these solutions in 33% more accounts also since the end of 2019. Several large firms, including a top 20 RIA, according to Barron's, are transitioning a meaningful amount of their managed account assets to our platform as they seek an operationally efficient way to migrate to model-traded UMAs. To date, we've secured open banking agreements with half of the top 10 U.S. banks. We're actively engaged with 25 banks at the moment and expect to have 10 more agreements executed by the end of the year. Adjusted revenue for the quarter was $235 million, well above the guidance we provided. As a result, our adjusted EBITDA of $55.8 million was up 29% compared to last year. This translated to similarly strong performance and adjusted earnings per share of $0.59, 28% above last year. However, the market at June 30 was still not back to beginning of the year levels, and our AUMA was down around $22 billion from the beginning of the year. Specifically, second quarter market action was a positive $60 billion in AUMA, offsetting a good portion of the negative $82 billion in the first quarter. We now expect adjusted revenue for the year to be between $977 million and $980 million, up 7% to 8% year-over-year. Adjusted EBITDA to be between $221 million and $223 million, up 14% to 15% year-over-year. And adjusted earnings per share to be between $2.28 and $2.31. We ended June with $92 million in cash and debt of $620 million. Our net leverage ratio at the end of June was 2.3 times EBITDA, down from 2.6 at the end of March. With $225 million available on our revolver and positive cash flow generation, we are comfortable that we have the liquidity and flexibility as we balance managing the business in the current environment with continuing to invest in growth opportunities, both organically and through strategic activities. During the 10 years after our founding extraordinary people, many who still work in Envestnet today, transformed an idea into a business, into a company that ultimately was traded on the New York Stock Exchange. We accomplished a lot in our first 10 years. During these past 10 years, we've experienced tremendous growth, both organically and through acquisition as we established investment as an industry leader. We have work to do, but I am incredibly excited about what these next 10 years will bring for us.

This translated to similarly strong performance and adjusted earnings per share of $0.59, 28% above last year. And adjusted earnings per share to be between $2.28 and $2.31.

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As a result of the revenue growth, continued margin expansion and the effective deployment of the balance sheet, ITT delivered adjusted earnings per share of $0.99, growing 21% over the prior year. We drove incremental productivity in the quarter, roughly 280 basis points through a combination of shop floor and sourcing actions, and we continue to apply strict controls over our fixed costs as growth resumes. We thought to overcome a year-over-year $0.23 or 370 basis point raw material headwind. Our ITTers delivered 60 basis points of adjusted segment operating margin expansion, an exceptional result, considering the supply chain dynamics we see. We generated organic orders growth of 27% with strong demand in Friction aftermarket, rail, connectors and industrial controls. Finally, we put our capital to work, repurchasing an additional $50 million of ITT shares to bring our year-to-date repurchases above $100 million, exceeding our repurchase commitment for the full year. These accomplishments and the dedication of our ITTers drove adjusted earnings-per-share growth of over 20% compared to prior year and 2% above 2019 pre-pandemic levels. This year, we have been awarded content on 25 new EV platforms and our win rate is significantly above our current global OE share of over 25%. In Connect & Control Technologies, we drove 17% organic sales growth with strong demand in North America distribution, especially in the industrial market. This, coupled with progress on CCT's operations, generated 17% adjusted segment margin for the quarter, putting the business closer to pre-pandemic levels. Lastly, we generated 8% organic revenue growth in industrial process, driven by short-cycle demand across parts, valves and service. One of the most telling metrics for ITT this quarter was the 27% organic orders growth. Q3 was also the third consecutive quarter of sequential orders growth in projects with 36% organic order growth. As a result, IP's backlog was up $28 million in the quarter. In Connect & Control, orders grew over 40% organically, including an encouraging 70% orders growth in aerospace and the strong performance in North America distribution. Even with these challenges, MT grew over 20% organically versus 2020 and 4% above 2019. And for the year, we now expect MT to deliver over $1.3 billion in revenue, comfortably above 2019. We now expect adjusted earnings per share in the range of $4.01 to $4.06 at the high end, which equates to 25% to 27% growth versus prior year. This is a $0.06 improvement at the midpoint after a $0.37 increase through the first half of the year. We are continuing to integrate ESG in our business strategy and the day-to-day operations of over 10,000 ITTers. Some highlights from the report to note: we drove a 25% reduction in greenhouse gas emissions, and a 23% reduction in waste sand to landfills, with 25% fewer workplace safety incidents. Our capex for the year is approximately 3% of revenue through the third quarter. From the inception of this initiative in 2018, we have commercialized more than 100 different pump models, representing 23% of our total product portfolio. In addition, we completed redesign for more than 30 additional pumps ahead of their commercial release. We have only begun to scratch the surface with more than 70% of the product offerings still to be addressed. As an example of this effort, following the success of our BB2 pumps, our year-to-date order growth for our recently redesigned magnetic drive pump is 40%. Regarding our other capital deployment priorities, we increased our dividend rate by 30% after 15% the year before. This represents an annual dividend yield of approximately 1%. Our share repurchases this quarter will drive a 1% reduction in our weighted average share count for the full year. We will continue to drive repurchase activity in the future and our existing $500 million authorization. In our OE business, Friction's market outperformance was over 1,000 basis points this quarter, significantly above our historical average despite large declines in global auto production levels. For all of ITT, we estimate that the supply chain disruptions deducted approximately 350 basis points from our sales growth this quarter. And similar to what we saw in Q2, demand in commercial aerospace is increasing as exhibited by the 70% growth in aerospace orders. On segment margin, CCT grew margin by 300 basis points and IP by 150 basis points, while MT declined 110 basis points, mainly due to raw material inflation. We overcame a 470 basis point inflation headwind to drive 60 basis points of adjusted segment margin expansion. On adjusted EPS, despite the challenges Luca highlighted in his introduction, we drove a $0.42 operational improvement year-over-year through a combination of higher sales volumes, strategic pricing actions and productivity across the enterprise. We achieved an adjusted trailing 12-month free cash flow margin of more than 11% this quarter, due to higher segment operating income. Our year-over-year growth was significantly impacted by $0.23 headwind related to raw material inflation and a $0.09 headwind from prior year environmental settlements and temporary cost actions. Partially offsetting these items was a roughly $0.04 benefit from foreign currency. We also realized a slightly lower effective tax rate versus the prior year, which drove over a $0.02 benefit. We now expect our full year effective tax rate to be approximately 20.75%. Motion Technologies Q3 organic revenue growth of 20% was primarily driven by strength in the aftermarket as the Friction OE business declined slightly given the supply chain headwinds affecting OEMs. This and the raw material inflation also impacted operating margin as we had signaled last year -- last quarter. However, as with last quarter, our Friction OE business executed very well with over 99% on-time performance across all Friction plants. For Industrial Process, revenue was up 8% organically. As we signaled last quarter, we see the project funnel continuing to grow and IP was able to capture a significant share as evidenced by the 36% organic order growth in project this quarter. IP margin expanded 150 basis points to 15.6% with an incremental margin of 33%, this was driven by higher sales volume, favorable mix, given the higher proportion of short-cycle sales, productivity and price, partially offset by labor and material inflation as well as higher freight charges given shipping delays. With incremental margin of 35%, CCT generated segment margin above 17%. This is a 300 basis point improvement over prior year. This margin profile is approaching pre-pandemic levels, but with approximately $20 million less in revenue. Third, CCT orders were up 40% organically in -- on the strength of our connector portfolio, particularly in North America. CCT backlog is up 17% organically or $40 million since year-end with a book-to-bill of 1.06. Through two quarters we had raised our organic sales outlook by 600 basis points and adjusted earnings per share by $0.37 versus the midpoint of our original guidance. Given our strong performance, today, we are again raising the midpoint of our adjusted earnings per share range by an additional $0.06 to reflect the stronger-than-anticipated results and lower tax rate. Nevertheless, in 2021, we expect to comfortably exceed pre-pandemic adjusted earnings per share levels. Year-over-year we expect segment margin to grow approximately 50 to 75 basis points. Lastly, we have deployed over 2.8 times our year-to-date adjusted free cash flow through our asbestos divestiture, dividends and share repurchases.

As a result of the revenue growth, continued margin expansion and the effective deployment of the balance sheet, ITT delivered adjusted earnings per share of $0.99, growing 21% over the prior year. We now expect adjusted earnings per share in the range of $4.01 to $4.06 at the high end, which equates to 25% to 27% growth versus prior year. We achieved an adjusted trailing 12-month free cash flow margin of more than 11% this quarter, due to higher segment operating income. Nevertheless, in 2021, we expect to comfortably exceed pre-pandemic adjusted earnings per share levels.

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For the first time in our history, Assured Guaranty's adjusted book value has surpassed $100 per share and both shareholders' equity per share and adjusted operating shareholders' equity per share were also new records. We achieved this milestone while producing our best direct new business insurance production for second quarter since the acquisition of AGM in July of 2009. Our financial guaranty, guaranty PVP of $96 million was 71% higher than in last year's second quarter. Our people were extremely effective, operating 100% remotely in unprecedented economic and market conditions. As a result, we saw the best second quarter and first half direct U.S. public finance production in more than a decade, driving direct PVP of $60 million and $89 million, respectively. And I can tell you that with our July municipal insured par volume exceeding $2 billion, the surge in demand for our guaranty has not let up. At the industry level, more than $9.1 billion of U.S. public finance primary market par was sold with bond insurance in the second quarter, the most for any quarter since mid-2009 and industry insurance penetration reached 8.7% of total new issue par sold, the highest quarterly level since 2009. Six months industry insured volume is 43% higher than in the first six months of 2019. In this strengthened municipal bond insurance market, Assured Guaranty was selected to ensure 63% of the insured new issue par sold in the second quarter. Compared with the second quarter of last year, Assured Guaranty's primary market production was up 58% to $5.8 billion in insured par sold and up 22% to 318 new issue in transaction count. We guaranteed 11 transactions of over $100 million in insured par during the quarter, the largest of which was a $385 million school district transaction with the dormitory authority of the state of New York, rated double AA3 by Moody's and AA minus by Fitch. The high value that investors place in our guaranty was visible among credits with underlying S&P or Moody's ratings in the AA category, where we insured more than $1 billion of primary market par in the second quarter. During the second quarter, we insured $533 million of secondary market par compared with $233 million for the first quarter of the year and $327 million for the second quarter of 2019. In aggregate for the primary and secondary markets, Assured Guaranty provided insurance on $6.3 billion of municipal bonds, 58% more than in last year's second quarter. We also had a great second quarter in our international infrastructure business, where we generated $28 million of direct PVP, over 3 times last year's second quarter PVP and the second highest quarterly direct PVP in the sector, since before the Great Recession. Our global structured finance business also performed well in the second quarter contributing $8 million of PVP from a variety of transactions, including an insurance securitization and two whole business securitizations. We continue to believe that for the remainder of the portfolio, the 96% of par exposure that is investment grade, there should be no material losses caused by the pandemic. For example from 2008 through second quarter 2020, we paid $11 billion in gross claims, $5 billion in net and returned more than $4.3 billion to shareholders through share repurchases and dividends. We estimate that we have $2.6 billion of capital in excess of S&P's AAA requirement as of year-end 2019. We continue to support the growth of the business and have allocated $1 billion of our investment portfolio to investment it manages, with the goal of generating even greater value for our investors and policyholder. As we worked with David for a long time has over 30 years of experience includes senior positions at ACE Financial Solutions, which required Capital Re when David was its CFO and which is a company we now know as Assured Guaranty Corp. We have abundant capital liquidity, supporting a 96% investment grade insured portfolio, consisting of transactions carefully selected to perform better under economic stress than others in their respective sectors. In terms of capital management, we are ahead of our plan, relative to the number of shares repurchased, which helped us to propel our adjusted book value per share to over $100, a record high. Turning to second quarter 2020, adjusted operating income was strong coming in at $190 million or $1.36 per share. This consists of $154 million of income from our Insurance segment, a $9 million loss from our Asset Management segment and a $26 million loss from our Corporate division, which is where we reflect our holding company interest and other corporate expenses. Starting with the Insurance segment, adjusted operating income was $154 million compared to $161 million in the second quarter of 2019. Net earned premiums and credit derivative revenues in the second quarter 2020 were $125 million compared with $127 million in the second quarter of 2019. Structured finance net earned premiums and credit-driven revenues decreased to total of $13 million, due to the decline in this portfolio. In total, accelerations due to refundings and terminations were $32 million in the second quarter 2020 compared with $29 million in the second quarter of 2019. This reassumption resulted in the $30 million -- $38 million commutation gain. Net investment income for the Insurance segment was $82 million in the second quarter of 2020 compared with $110 million in the second quarter of 2019. Second quarter 2020 Insurance segment adjusted operating income also includes a $21 million after-tax mark-to-market gain on our investments in Assured Investment Management funds. As of June 30, 2020, the insurance companies had authorization to invest up to $500 million in funds managed by Assured Investment Management, of which $354 million have been invested as of June 30, 2020. Loss expense in the Insurance segment was $39 million in the second quarter of 2020 and was primarily related to economic loss development on certain Puerto Rico exposures. In the second quarter of 2019, we recorded a benefit of $50 million primarily related to higher projected recoveries for previously charged up loans for second lien U.S. RMBS. The net economic development in the second quarter 2020 was $34 million, which primarily consisted of loss development of $30 million in the U.S. public finance sector, primarily attributable to Puerto Rico exposures. Net economic loss development in U.S. RMBS of $1 million mainly consisted of increased delinquencies, offset by higher projected excess spread across both third and second lien transactions. In the Asset Management segment, adjusted operating income was a loss of $9 million. Prior to the current market disruptions, we had made good progress on the winding down of legacy funds, with outflows of $541 million in the second quarter. As of June 30, 2020, the insurance subsidiaries have together allocated $250 million to the municipal obligation strategies and $100 million to CLO strategies, with authorization to allocate an additional $200 million to CLO strategies. In our Corporate division, the holding companies currently have cash and investment available for liquidity needs in capital management activities of approximately $70 million, of which $80 million resides in AGL. Adjusted operating loss for the Corporate division was a loss of $26 million in both second quarter 2020 and second quarter 2019. In second quarter 2020, the effective tax rate was 14.2%, compared with 21% in the second quarter of 2019. Turning to our capital management strategy, in the second quarter of 2020, we repurchased 6 million shares for $164 million, for an average price of $27.49 per share. Since the end of the quarter, we have purchased an additional 800,000 shares for $90 million, bringing our year-to-date repurchases as of today to over 10 million shares. Since January 2013, our successful capital management program has returned $3.5 billion to shareholders, resulting in a 60% reduction in total shares outstanding. The cumulative effect of these repurchases was a benefit of approximately $23.56 per share in adjusted operating shareholders' equity and approximately $42.76 in adjusted book value per share, which helped drive these important metrics to new record highs of $71.34 in adjusted operating shareholders' equity per share and $104.63 of adjusted book value per share, which both represent record high.

Turning to second quarter 2020, adjusted operating income was strong coming in at $190 million or $1.36 per share.

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Pioneer delivered a very strong first quarter, generating free cash flow of approximately $370 million when adjusted for partially acquisition cost. You can see that we increased our 2021 estimated free cash flow up to about $2.7 billion. You can see the magnitude of the synergies, $525 million, which will improve our free cash flow generation, which will be highlighted on a subsequent slide. And going into 2022, the company will be over 700,000 barrels of oil equivalent per day just in the Permian Basin in 2022. As Neal mentioned, we closed yesterday on our DoublePoint acquisition, approximately 100,000 acres right in the heart -- core of the core of the Midland Basin. This will take our Midland Basin on up to over 900,000 net acres. Now with the contiguous acreage and the operational synergies, just to give you an idea how dominant we are in the Midland Basin, we'll have 25% of the basin rig count and 25% of the basin frac fleet rig count. When you look at the strip, last year -- I mean, of the strip over the next several years as it continues to move up and look at our model of growing oil production 5% per year over the next several years, our reinvestment rate will actually be below, we say 50 to 60% here. It'll actually be below 50%. We'll continue to reduce it below 0.75 next year and continue to drive it down to a very, very low level. So we're targeting a 10% total return. We're showing now, with DoublePoint Energy on top in the brighter -- darker blue color, adding about $5 billion of free cash flow over the next several years to 2026, increasing our total free cash flow at the company. So the number continues to move up with the strip moving up, generating $23 billion of free cash flow. As we have already stated, approximately -- this actually represents 50% of our current enterprise value, that 20 -- total enterprise value, including market cap plus debt. The addition of DoublePoint is a 25% increase on top of our free cash flow. That's taken the $5 billion over the $23 billion -- $5 billion over $23 billion. I think what's key is that when you look at the current stock price, our dividend yield will move up from 1.5% to over 4% in 2022 and over 8% in the following years to 2026. I do have to have a call out for Devon and Rig's great slide, comparing their dividend to peers, I think we're in there around 1.5% toward the bottom quartile. They're showing them leading this year at 7%. Pioneer will move to second place next year, moving over 4, and then moving up to the top spot above Devon. And the primary driver is really just our low -- our margins in the high 20s, our low-cost basis in addition to the fact that we're paying out 75% of our cash flow versus Devon's 50%. Mechanics will be paying out long term, roughly 75% of the remaining annual free cash flow after the base dividend is paid. When you look at -- including the base dividend, approximately 80% of the company's free cash flow is expected to be returned to shareholders. As Scott mentioned, DoublePoint is currently producing at 92,000 BOEs per day, and we expect to ramp them up to about 100,000 BOEs per day by the end of the quarter and with an additional 20 to 25 POPs planned between now and quarter end. We plan to maintain that production, 100,000 BOEs a day for the second half of the year. So overall, we are forecasting 2021 production of 351,000 barrels of oil per day to 366,000 barrels of oil per day. And on a BOE basis, 605,000 to 631,000. Looking at capital, we are adding $530 million to $570 million of incremental capital related to the DoublePoint transaction over the course of the remainder of the year. Total capex is now projected at $2.95 billion to $3.25 billion on cash flow of about $5.9 billion based on strip prices, which is leading to what Scott talked about, $2.7 billion of free cash flow for the year. You can see our -- for a full year, that we plan to average 22 to 24 rigs and deliver 470 to 510 POPs. If you take that just for the remainder of the year, we plan to run with the addition of DoublePoint, 24 to 26 rigs and seven to nine frac fleets. Currently, we're at 26 rigs and nine frac fleets. And longer term, as we think about reducing our growth rate from 30% down to 5%, we can drive that down to three to four rigs as we are consistent with our 5% growth plan over the long term. You can see on the map there over one million acres, predominantly in the Midland Basin, 920,000 and 100,000 acres in the Delaware. And just for a point of reference, first quarter production was 74% oil in the Delaware. On G&A, we've accomplished $100 million of Parsley savings. As it relates to DoublePoint, they're running about $25 million annually in G&A. We expect to bring that under $10 million on an annual basis, and we think we'll be there beginning of the third quarter of 2021. If you recall, those were over 5% coupon. We refinanced those on a weighted average base well under 2%. We've also, and Joey will talk more about this, successfully tested simulfrac on our acreage during the first quarter, and we're seeing significant savings like the industry -- other industry participants in that $200,000 to $300,000 per well. And what this allows us to do, is we've successfully drilled longer laterals out to 15,000 feet, really up from the 9,000 to 10,000 feet that we've been drilling at, really allow for a lot of locations that we can drill longer laterals on, which is much more capital efficient and really adding essentially the same production by drilling fewer wells. We are forecasting G&A per BOE to be around $1.15 to $1.20 by year-end. On slide 13, you can see how Pioneer's high-quality asset base positions us as the only E&P to realize a corporate breakeven below $30 a barrel WTI within our peer group. Our simulfrac operations contributed to these gains with the successful execution of four pads in Q1, where we were able to achieve approximately 3,000 feet of completed lateral per day. This is greater than a 50% improvement when compared to our program average. It's still early days, but we estimate savings to be in the range of $200,000 to $300,000 per well. So this chart represents more than 64 million barrels of hydrocarbon liquids per day, including the largest national oil companies, majors and independents. On slide number 16, the strong focus on ESG. Pioneer inclusive of Parsley is a very low flaring intensity of 0.4% compared to peers of 1.3%.

When you look at the strip, last year -- I mean, of the strip over the next several years as it continues to move up and look at our model of growing oil production 5% per year over the next several years, our reinvestment rate will actually be below, we say 50 to 60% here. It'll actually be below 50%. As we have already stated, approximately -- this actually represents 50% of our current enterprise value, that 20 -- total enterprise value, including market cap plus debt. And the primary driver is really just our low -- our margins in the high 20s, our low-cost basis in addition to the fact that we're paying out 75% of our cash flow versus Devon's 50%. Total capex is now projected at $2.95 billion to $3.25 billion on cash flow of about $5.9 billion based on strip prices, which is leading to what Scott talked about, $2.7 billion of free cash flow for the year. You can see our -- for a full year, that we plan to average 22 to 24 rigs and deliver 470 to 510 POPs. This is greater than a 50% improvement when compared to our program average.

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With 176% year-over-year growth and public cloud ARR during the first quarter, customer engagement and acceptance continues to grow and become more evident. Sirius XM, the leading audio entertainment company in North America, with more than 150 million listeners is migrating to Vantage on AWS as it modernizes its data and analytics ecosystem. This customer is running over 7 million analytical queries and upwards of 20 million total queries per day to support 80 business applications critical to running its operations. Within our senior leadership ranks, in the last two quarters, 60% of our appointments were diverse, including 40% female. Public cloud ARR grew sequentially by over 18 million, ending the quarter at 124 million as reported or 176% growth year-over-year. We exceeded our outlook of 165% growth year-over-year, due to continued natural momentum of our Vantage multi-cloud platform. We are very pleased by the value our customers see for Vantage in the cloud, which gives us confidence to reaffirm our outlook for fiscal 2021 public cloud ARR year-over-year growth to be at least 100%. Total ARR increased to 1.404 billion at March 31, 2021 from 1.254 billion at March 31, 2020. Total ARR grew 12% year-over-year as reported. On a sequential basis total ARR was down 1% as reported and flat in constant currency given very strong FX headwinds. Turning to revenue, we had strong performance in all revenue categories, which increased total revenue to 491 million as reported from 434 million, an increase of 13% year-over-year, and 10% in constant currency. Recurring revenue as reported increased to 372 million from 311 million, a 20% increase year-over-year, and a 17% increase in constant currency. These few significant transactions resulted in approximately 24 million of 2021 recurring revenue recognized in the first quarter, rather than ratably across each of the four quarters of 2021. And importantly, these few transactions are not included and did not impact the 176% year-over-year growth and public cloud ARR we reported this quarter. Turning to perpetual and consulting revenue, perpetual revenue of 23 million as reported showed flat growth year-over-year, but was ahead of the outlook comments we provided at the beginning of the year. Consulting revenue as reported decreased to 96 million from 100 million a 4% decrease year-over-year. As we noted in our outlook comments last quarter, we anticipated consulting revenue to decline by 15% year-over-year in the first quarter of 2021, and to gradually improve throughout fiscal 2021. Turning to gross profit, Q1 gross margin was 64.2%, approximately 10 percentage points greater than last year's period and approximately 5 percentage points greater than last quarter. We generated 315 million in gross profit dollars, which is 80 million higher than the same period last year, and 24 million better than last quarter, despite our total revenues been unchanged sequentially. Turning to operating expenses, total operating expenses were down 1% year-over-year and 11% sequentially. Turning to earnings per share, earnings per share of $0.69 significantly exceeded our outlook range of $0.38 to $0.40 provided last quarter, by $0.30 when using the midpoint. To provide some context are the main drivers of this $0.30 differential, approximately $0.16 is attributable to the few transactions where recurring revenue was recognized on an annual basis in the first quarter instead of on a quarterly basis throughout full-year 2021. The remaining $0.14 was driven by the following and will impact full-year 2021 EPS. Free cash flow in the quarter was 105 million, well ahead of the pace needed to achieve the annual free cash flow outlook of at least 259 we provided at the beginning of the year. As an update to cash payments related to our Q3 2020 cost actions, we previously expected to make total cash payments of approximately 42 million during fiscal 2021 and that 27 million was to be paid in the first quarter of fiscal 2021. We now expect total cash payments in fiscal 2021 of 36 million. We paid 18 million during the first quarter of fiscal 2021, and the remaining 18 million is expected to be paid during the remainder of fiscal 2021. About 14 million of the remaining 18 million is expected to be paid in the second quarter. Turning to stock buyback, we bought back 2.6 million shares at an average price of $32.94 or 85 million in total, as we take advantage of our strong balance sheet to buy back stock and offset dilution for shares issued this year. Probably cloud ARR is expected to grow at least 100% year-over-year from 106 million at December 31, 2020. Total ARR is anticipated to grow in the mid-to-high single-digit percentage range year-over-year from the restated balance of 1.425 billion at December 31, 2020. Total recurring revenue is expected to grow in the mid-to-high single-digit percentage range year-over-year from the restated balance of 1.309 billion for the year ending December 31, 2020. Total revenue is anticipated to grow in the low-single-digit percentage range year-over-year from the 1.836 billion for the year ended December 31, 2020. Non-GAAP earnings per diluted share are expected to be in the range of $1.61 to $1.67, which at the new midpoint of $1.64 is a $0.10 increase from the midpoint of the range previously provided. As I mentioned in my comments regarding first quarter 2021 results, $0.14 is flowing through to the full-year, but is offset by $0.06 of higher tax rate and weighted average diluted shares outstanding. We are raising our full year earnings per share outlook further by $0.02 at the midpoint. Free cash flow for the year is expected to be in the range of 275 million to 300 million, which is an increase from the prior outlook of at least 250 million. We expect to continue to be opportunistic in share buybacks and have approximately 352 million of share repurchase authorization at March 31, 2021. We anticipate Q2 gross margins to be up approximately 40 basis points to 50 basis points from the comparable quarter in the prior year, and Q2 operating margins to be up approximately 250 basis points from the comparable quarter in the prior year. We now expect the full-year tax rate to be approximately 24% to 25%. Given the rise in our stock price, and its impact in calculating fully diluted weighted average shares outstanding for earnings per share purposes, we now assume about 114 million fully diluted weighted average shares outstanding for both the full-year and the second quarter. With that, the outlook for the second quarter for 2021 is as follows: Public cloud ARR is expected to grow at least 155% year-over-year or in the range of 15 million to 20 million sequentially. Non-GAAP earnings per diluted share to be in the range of $0.47 to $0.49.

Turning to revenue, we had strong performance in all revenue categories, which increased total revenue to 491 million as reported from 434 million, an increase of 13% year-over-year, and 10% in constant currency. Turning to earnings per share, earnings per share of $0.69 significantly exceeded our outlook range of $0.38 to $0.40 provided last quarter, by $0.30 when using the midpoint. Non-GAAP earnings per diluted share are expected to be in the range of $1.61 to $1.67, which at the new midpoint of $1.64 is a $0.10 increase from the midpoint of the range previously provided. Non-GAAP earnings per diluted share to be in the range of $0.47 to $0.49.

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Revenues grew 3%, with organic revenue declining a single percent. EBITDA also grew 3%, and free cash flow grew 16%. This cash flow performance, $1.7 billion is just astounding. We exit 2020 as a better company, a company with higher quality revenue streams, a company with improved future innovation prospects and a company with whose portfolio that was enhanced with $6 billion of capital deployment. Finally, we are able to deploy $6 billion to further enhance Roper's Group of companies' headlines by our Vertafore acquisition. So when we look back on 2020, we highlight two key themes: First, we grew, cash flow increased 16% in the middle of a pandemic. Over the past five years, we highlight that our revenue grew at a 9% compounded rate, EBITDA at 10% and cash flow at 13%. Conversely, we are much less tied to cyclical end markets today, a little over 15% of our portfolio. So as I think back over the nearly 10 years I've been with Roper, I cannot think of a better set of tailwinds heading into a year. Total revenue increased 8%, as we eclipsed $1.5 billion of quarterly revenue for the first half. Organic revenue for the enterprise declined 2% versus prior year. EBITDA grew 7% in the quarter to a record $552 million. EBITDA margin was down 40 basis points versus prior year at 36.6%. Tax rate came in at 19.9%, a little lower than last year's 21.6%. So all-in, this resulted in adjusted diluted earnings per share of $3.56, which was above our guidance range. Application Software grew 35% with the addition of Vertafore. Organic for the segment was minus 2% with mid single-digit recurring revenue growth continuing. Sharp declines in our CBORD & Horizon businesses, serving K-12 and higher education impacted the segment as many schools unfortunately remain closed. For Network Software & Systems, plus 2% organic growth with our software businesses, putting up a very solid plus 4% organic. For Measurement & Analytical Solutions, plus 1% organic growth, as we start to see some sequential recovery at Neptune in our Industrial businesses. Lastly, for Process Technologies, a 21% organic decline, with margins holding up well at 31.3%. So turning to page 10, looking at net working capital. Honestly, the slide mostly speaks for itself, ending the quarter with negative 8% net working capital as a percentage of Q4 annualized revenue. You can see here a meaningful improvement versus 2018, improving from negative 3.4% to negative 8% in 2020. Q4 free cash flow of $558 million, was 23% higher than last year and represented 37% of revenue. So for the full-year 2020, we generated $1.72 billion of operating cash flow and $1.67 billion of free cash flow. So to repeat, that's $1.7 billion of free cash flow in 2020. Full-year free cash flow growth was 16% and our free cash flow conversion from EBITDA was a robust 84%. So turning to page 12, updating on our balance sheet. As Neil mentioned earlier, we ended the year with total capital deployment of approximately $6 billion, which included the EPSi acquisition that closed during the fourth quarter on October 15th. Overall, cost of financing was approximately 1%. Looking ahead, we plan to rapidly reduce leverage throughout 2021, taking advantage of our pre-payable revolver, which has a current balance of approximately $1.6 billion. In aggregate, we thought our full-year organic revenues would be plus or minus flat, and we came in at down minus 1%. We guided DEPS to be between $11.60 and $12.60 and came in at $12.74. Relative to Application Software, this segment played out as anticipated and was up 1% on an organic basis for the year. As a reminder, recurring revenue in this segment is about 70% of our revenue stream. Perpetual revenues, about 10% of this segment's revenue were under pressure as expected. As it relates to our Network segment, we expect the organic revenue for the year to be up mid singles to double-digits when, in fact, we grew 3% for the full year. In April, we expected approximately $75 million more in revenue from this project than actually occurred in 2020. But we expect this $75 million of pushed revenue to be recognized in '21. We posted 1% growth. Finally, and as it relates to our Process Tech segment, we expected to be down 20% to 25%, and we were logging in it down 21%. For Application Software, where revenues here were $1.81 billion, up 1% organically, with EBITDA of $772 million. Here, revenues were $1.74 billion, up 3% on an organic basis, with EBITDA of $732 million. For the full year, TransCore pushed about $100 million of revenue out of 2020 and to '21 associated with their New York project. As we look to the first quarter of 2021, we see organic revenue, as you can see in the lower right hand box to be down 3% to 5% for the quarter. Now let's turn to our MAS segment, revenues for the year were $1.47 billion, up 1% on an organic basis, with EBITDA $508 million. Revenues for the year were $519 million, down 21% on an organic basis, with EBITDA of $156 million or 30% of revenue. Compared versus two years ago, these businesses are down about $90 million in EBITDA and yet maintained 30% EBITDA margins. As we look to the first quarter, we expect declines to moderate in the first quarter to be in the 10% range. Our medical product businesses were exceptional last year, up 20%. Based on what we just outlined, when you roll everything together, we are establishing our 2021 full-year adjusted DEPS guidance to be in the range of $14.35 and $14.75. Our tax rate should be in the 21% to 22% range. For the first quarter, we are establishing adjusted DEPS guidance to be between $3.26 and $3.32. Of note, our guided Q1 adjusted DEPS is roughly 22% to 23% of our full year guidance range and is consistent with our long-term historical DEPS seasonality. We grew revenue 3% in aggregate and only declined a single percent on an organic basis. EBITDA margins were steady at 35.8%, and cash flow grew 16% to $1.7 billion. This means we had cash flow margins of 30%. Given this performance, our business models ability to foresee these best performance, we stayed focused on executing our capital deployment strategy, which resulted in $6 billion of deployment on high quality, niche leading vertical software companies.

Total revenue increased 8%, as we eclipsed $1.5 billion of quarterly revenue for the first half. So all-in, this resulted in adjusted diluted earnings per share of $3.56, which was above our guidance range. Based on what we just outlined, when you roll everything together, we are establishing our 2021 full-year adjusted DEPS guidance to be in the range of $14.35 and $14.75. For the first quarter, we are establishing adjusted DEPS guidance to be between $3.26 and $3.32.

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Let me also remind you that CVR Partners completed a 1 for 10 reverse split of its common units on November 23, 2020. Yesterday, we reported a first quarter consolidated net loss of $55 million and a loss per share of $0.39. Unplanned downtime and increased operating costs associated with the winter storm negatively impacted our first quarter results by approximately $41 million. Our earnings for the quarter were further impacted by a noncash mark-to-market on our 2020 RIN obligation of $98 million. For our Petroleum segment, the combined throughput for the first quarter of 2021 was approximately 186,000 barrels per day as compared to 157,000 barrels per day for the first quarter of 2020, which was impacted by the planned turnaround at Coffeyville. We experienced unplanned downtime at both facilities in February as a result of the winter storm, which reduced total throughput for the quarter by approximately 34,000 barrels per day. The Group 3 2-1-1 crack averaged $16.33 per barrel in the first quarter as compared to $12.21 for the first quarter of 2020. On a 2020 RVO basis, RIN prices averaged approximately $5.57 per barrel in the first quarter, a 250% increase from the first quarter of 2020. The Brent-WTI differential averaged $3.18 in the first quarter compared to $5.04 per barrel in the prior year period. The Midland Cushing differential was $0.87 per barrel over WTI in the quarter compared to $0.06 per barrel under WTI in the first quarter of 2020. And the WCS to WTI differential was $11.82 per barrel compared to $17.77 for the same period last year. Light product yield for the quarter was 100% on crude oil processed and current economics dictate maximizing gasoline. In total, we gathered approximately 112,000 barrels per day of crude oil during the first quarter of 2021 compared to 136,000 barrels per day for the same period last year. We currently forecast our gathering volumes for the second quarter to be in the 125,000 to 130,000 barrel a day range. Ammonia utilization for the first quarter was 87% at Coffeyville and 89% at East Dubuque. With the USDA estimating corn planning this year of 91 million acres, the 2020 inventory carryout could be at the lowest level since 2014. Our consolidated net loss of $55 million and loss per diluted share of $0.39 includes a mark-to-market gain of $62 million related to our investment in Delek and favorable inventory valuation impact of $66 million. The effective tax rate for the first quarter 2021 was a benefit of 43% compared to a benefit of 27% for the prior year period, primarily due to state income tax credits. We continue to anticipate an income tax refund related to the CARES Act of $35 million or $40 million, which we expect to receive in the second half of 2021. The Petroleum segment's EBITDA for the first quarter of 2021 was negative $61 million, which included an inventory valuation benefit of $66 million. This compares to EBITDA of negative $77 million in the first quarter of 2020, which included unfavorable inventory valuation impact of $136 million. Excluding inventory valuation impacts in both periods, our Petroleum segment EBITDA would have been negative $127 million for the first quarter of 2021 compared to positive $59 million in the prior year period. In the first quarter of 2021, our Petroleum segment's refining margin, excluding inventory impacts, was negative $0.88 per total throughput barrel compared to $11.06 in the same quarter of 2020. The increase in crude oil and refined product prices through the quarter generated an inventory valuation benefit of $3.93 per barrel, this compares to a $9.54 per barrel unfavorable impact in the same period last year. Excluding inventory valuation impact, unrealized derivative gains and losses and the mark-to-market impact of our 2020 RIN obligation, the capture rate for the first quarter of 2021 was 46% compared to 86% in the first quarter of 2020. In addition, RINs expense reduced our capture rate by 65% in the first quarter of 2021, which includes a 36% impact related to the mark-to-market of our 2020 RIN obligation. Derivative losses for the first quarter of 2021 totaled $32 million, which includes unrealized losses of $43 million, primarily associated with frac spread derivatives, offset by gains on Canadian Crude Oil. In the first quarter of 2020, we had total derivative gains of $46 million, which included unrealized gains of $12 million. RINs expense in the first quarter of 2021 was $178 million or $10.62 per barrel of total throughput compared to $19 million or $1.32 per barrel for the same period last year. Our first quarter RINs expense was inflated by $98 million from the mark-to-market impact related to our 2020 accrued RFS obligation, which was mark-to-market at an average RIN price of $1.39 at quarter end. We believe Wynnewood's obligation for 2021 should be exempt under the RFS regulation; for the full year 2021, we forecast a net obligation of approximately of 230 million RINs without considering waivers yet inclusive of the RINs we expect to generate from the renewable diesel production in the second half of the year. The Petroleum segment's direct operating expenses were $5.89 per barrel in the first quarter of 2021 as compared to $5.87 per barrel in the prior year period. On an absolute basis, operating expenses increased approximately $15 million compared to the first quarter 2020, primarily due to higher natural gas costs that are currently in dispute and additional repair and maintenance expenditures related to winter storm Uri. For the first quarter of 2021, the Fertilizer segment reported an operating loss of $14 million, a net loss of $25 million or $2.37 per common unit and EBITDA of $5 million. This is compared to first quarter 2020 operating losses of $5 million, a net loss of $21 million or $1.83 per common unit and EBITDA of $11 million. During the quarter, CVR Partners repurchased just over 24,000 of its common units for $0.5 million. Total consolidated capital spending for the first quarter of 2021 was $68 million, which included $10 million from the Petroleum segment, $3 million from the Fertilizer segment and $55 million from the Renewables segment. Environmental and maintenance capital spending comprised $12 million, including $10 million in the Petroleum segment and $2 million in the Fertilizer segment. We estimate total consolidated capital spending for 2021 to be approximately $235 million to $250 million, of which approximately $106 million to $114 million is expected to be environmental and maintenance capital and $123 million to $128 million is related to the renewable diesel project at Wynnewood. Our consolidated capital spending plan excludes planned turnaround spending, which we estimate to be approximately $9 million for the year in preparation for the planned turnaround at Wynnewood in 2022 and Coffeyville in 2023. Cash provided by operations for the first quarter of 2021 was $96 million. Despite elevated natural gas and utilities cost, increased capital spending and closing on the Oklahoma pipeline acquisition, we generated free cash flow in the quarter of $61 million. Working capital was a source of approximately $218 million in the quarter due to an increase in our RINs obligation and an increase in lease pre payable. At March 31, we ended the quarter with approximately $707 million in cash, an increase of $40 million from the end of 2020. Our consolidated cash balance includes $53 million in the Fertilizer segment. As of March 31, excluding CVR Partners, we had approximately $1 billion of liquidity, which was comprised of approximately $655 million of cash, securities available for sale of $235 million and availability under the ABL of approximately $364 million less cash included in the borrowing base of $208 million. Looking ahead to the second quarter of 2021, for our Petroleum segment, we estimate total throughput to be approximately 200,000 to 220,000 barrels per day. We expect total direct operating expenses to range between $75 million and $85 million and total capital spending to be between $6 million and $12 million. For the Fertilizer segment, we estimate our ammonia utilization rate to be greater than 95%. We expect direct operating expenses to be approximately $35 million to $40 million, excluding inventory impacts and total capital spending to be between $4 million and $7 million. Capital spending in the Renewables segment is expected to range between $65 million and $70 million. And with the increase in the Group 3 cracks, we have observed positive EBITDA trends in March, absent the 2020 mark-to-market impact for RINs. Starting with crude oil, global inventories are at or near 5-year averages and worldwide demand is projected at 96 million barrels per day for 2021, according to OPEC, a year-over-year increase of 6 million barrels per day. Passenger count and TSA checkpoint check-ins are higher, but still down over 40% compared to pre-pandemic levels and the imports of gasoline and diesel are higher while exports of both products are lower than a year ago. US refining throughput is down over 1 million barrels per day versus the 5-year average, although EIA reported utilization stats are distorted due to permanent refinement closures and reduced operable capacity. For the Fertilizer segment, the USDA is projecting 91 million acres of corn planted this year. The spring run has been strong, and NOLA urea price is around 200 -- excuse me, $385 per ton with UAN at nearly $300 per ton. Our net debt[Phonetic] prices have dramatically improved for nitrogen fertilizers by about 40% compared to the first quarter of 2021 levels. We currently expect total cost of the project to be $135 million to $140 million. As we work toward the completion of Phase 1, we are close to selecting technology for a potential Phase 2, which would involve adding pretreatment capabilities for lower cost and lower CI feedstocks. We are also starting a feasibility study for Phase 3 of developing a similar renewable diesel conversion project at Coffeyville and we are exploring the opportunities to add biomasses of feedstock to one or both of our refineries to aid in our sustainability efforts. Looking at the second quarter of 2021, quarter-to-date metrics are as follows: Group 3 2-1-1 cracks have averaged $19.48 per barrel with RINs averaging $6.92 on a 2020 RVO basis. The Brent-TI spread has averaged $3.62, with the Midland Cushing differential at $0.36 over WTI and the WTL differential at $0.14 per barrel under WTI, Cushing WTI and a WCS differential of $11.29 per barrel under WTI. Ammonia prices have increased to over $600 a ton, while UAN prices are over $325 per ton. As of yesterday, Group 3 2-1-1 cracks were $20.26 per barrel; Brent-TI was $3.07 And WCS was $11.90 under WTI. On a 2020 RVO basis, RINs were approximately $7.83 per barrel.

Yesterday, we reported a first quarter consolidated net loss of $55 million and a loss per share of $0.39. For our Petroleum segment, the combined throughput for the first quarter of 2021 was approximately 186,000 barrels per day as compared to 157,000 barrels per day for the first quarter of 2020, which was impacted by the planned turnaround at Coffeyville. Our consolidated net loss of $55 million and loss per diluted share of $0.39 includes a mark-to-market gain of $62 million related to our investment in Delek and favorable inventory valuation impact of $66 million. Derivative losses for the first quarter of 2021 totaled $32 million, which includes unrealized losses of $43 million, primarily associated with frac spread derivatives, offset by gains on Canadian Crude Oil.

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In short, the environment in which we conduct business remains uncertain. Our talented global team of more than 9,000 remained resilient and solution-oriented. Looking at the results for the quarter, our residential segment continued to excel with 38% year-over-year net sales growth and strong margins. Professional segment net sales for the quarter declined 8% year-over-year, which was better than expected. In this environment, we grew third quarter net sales by 0.3% to $841 million. Reported and adjusted earnings per share was $0.82 for the quarter, compared to reported earnings per share of $0.56 and adjusted earnings per share of $0.83 last year. For the first nine months, net sales increased by 0.6% to $2.54 billion. Diluted earnings per share was $2.37, compared to $2.18 in the first nine months of fiscal 2019. Year-to-date adjusted diluted earnings per share was $2.38, compared to $2.52 a year ago. At the end of the third quarter, our liquidity was $992 million. This included cash and cash equivalents of $394 million and availability under our revolving credit facility of $598 million. Now, to the segment results, residential segment net sales for the third quarter were up 38.3% to $205 million, mainly driven by strong retail demand for zero-turn riding and walk power mowers, and our expanded mass channel. Year-to-date fiscal 2020 net sales increased 20.4% compared to the same period of fiscal 2019. Residential segment operating earnings for the quarter were up 76.7% to $28.5 million. This reflects a 300 basis point year-over-year increase to 13.9% when expressed as a percent of net sales. Year-to-date, residential segment operating earnings increased 70.2% to $87.2 million. On a percent of sales basis, segment operating earnings increased 400 basis points to 13.8%. For the third quarter, professional segment net sales decreased 7.9% to $623.6 million. For the year-to-date period, professional segment net sales increased 1.3% compared to the same period of fiscal 2019. Professional segment operating earnings for the third quarter were up 39.3% to $113.7 million, and when expressed as a percentage of net sales, increased 610 basis points to 18.2%. Year-to-date professional segment operating earnings increased 0.8% compared to the same period in the prior fiscal year. When expressed as a percentage of net sales, operating earnings remained constant, 17.2% year-over-year for both fiscal periods. We reported gross margin for the third quarter of 35%, an increase of 330 basis points over the prior year period. Excluding acquisition-related costs, adjusted gross margin decreased 70 basis points to 35.2%. For the first nine months, reported gross margin was 35%, up 160 basis points compared with 33.4% in the prior year period. Adjusted gross margin was 35.2%, compared with 35.3% in the first nine months of fiscal 2019. SG&A expense, as a percent of sales, decreased 170 basis points to 21.2% for the quarter, primarily due to lower travel and meeting expenses, acquisition-related charges and employee salaries. For the first nine months of fiscal 2020, SG&A expense, as a percent of sales, was 21.9%, up 20 basis points from the prior year period. Operating earnings, as a percent of net sales, increased 500 basis points to 13.8% for the third quarter. Adjusted operating earnings, as a percent of net sales, increased 50 basis points to 13.9%. For the first nine months of fiscal 2020, operating earnings, as a percent of net sales, were 13.1%, compared with 11.7% a year ago. Adjusted operating earnings, as a percent of net sales, for the first nine months were 13.4%, compared with 14.2% a year ago. Interest expense decreased $700,000 for the third quarter compared to a year ago, due to lower interest rates. Interest expense increased $4.7 million for the year-to-date period compared to a year ago. For the full year, we continue to expect interest expense of about $33 million. The effective tax rate was 19.8% for the third quarter, and adjusted effective tax rate was 20.9%. For the first nine months of fiscal 2020, the effective tax rate was 19.2% and the adjusted effective tax rate was 20.6%. For the full year, we continue to expect an adjusted effective tax rate of about 20.5%. Accounts receivable totaled $294.7 million, down 5.6% from a year ago. Inventory was up by 5.7% to $656.2 million, and accounts payable decreased 11.8% to $268.7 million. Year-to-date free cash flow was $259.3 million with the net income conversion of 100.7%. We increased our cash dividend for the third quarter of fiscal 2020 by 11.1% to $0.25 per share as compared to the prior year period. We anticipate continued year-over-year growth in the residential market. Adjusted earnings per share will be similar to that of the fiscal 2019 fourth quarter. We continue to expect total net other income for fiscal 2020 to be about $13 million. We continue to expect depreciation and amortization for fiscal 2020 of about $95 million and capital expenditures of about $80 million.

In short, the environment in which we conduct business remains uncertain. In this environment, we grew third quarter net sales by 0.3% to $841 million. Reported and adjusted earnings per share was $0.82 for the quarter, compared to reported earnings per share of $0.56 and adjusted earnings per share of $0.83 last year. We anticipate continued year-over-year growth in the residential market. Adjusted earnings per share will be similar to that of the fiscal 2019 fourth quarter.

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Over the past five years, we have strategically evolved and simplified our portfolio from 32 brands to 12 brands, each with significant D2C and international opportunity, squarely focused on large, growing addressable markets. The macro trends around outdoor and active lifestyles, health and wellness, casualization and sustainability have only strengthened over the past 20 months and our current portfolio is well-positioned to benefit from these accelerating tailwinds. I'll start with Vans, which delivered 7% growth in Q2 despite meaningful wholesale shipments pushed into Q3, representing sequential improvement in underlying demand despite a more challenging than anticipated operating environment. Our retail associates are driving best-in-class conversion, up 20% relative to pre-pandemic peaks this quarter in the Americas. So despite a more challenging operating backdrop than anticipated, we are able to hold on to the low end of our prior outlook for Vans and now expect 7% to 9% growth relative to fiscal 2020. The September Vans Horror collection launch supported the fifth highest sales day on record for our Americas DTC digital business achieving a 100% sell-through within days. We are encouraged by the ongoing strength from Progression Footwear lines, up 15% relative to fiscal 2020 led by UltraRange and MTE and are pleased with the continued growth in Vans Family membership reaching 18.5 million consumers globally. Starting with The North Face, which delivered 29% growth in Q2 despite significant wholesale shipments pushed into Q3, representing a sharp acceleration of underlying demand alongside meaningful margin improvement. We are raising the outlook for TNF to 27% to 29% growth in fiscal 2022. This will be a $3 billion business, delivering high-teen growth relative to fiscal 2020 levels, with strong margin expansion underway. Moving on to Dickies, which continues to build upon its incredible run, delivering 19% growth in the quarter. Icons have been a focus for the marketing and sales teams and the results are compelling, highlighted by the accelerated growth of the 874 Work Pant. There are several versions of this 50-year-old icon, supported by ongoing innovation, which collectively have delivered over 100% growth year-to-date. We are raising the outlook for Dickies to at least 20% growth in fiscal '22, representing at least 30% growth relative to fiscal '20. We expect the brand will approach $1 billion next year as Dickies celebrates its 100-year anniversary. Next, Timberland delivered 25% growth in Q2, despite significant wholesale shipments pushed into Q3, representing an acceleration of underlying demand over the quarter. Despite historically low inventory levels, core boots and outdoor footwear continue to show strength as we head into the holiday, each growing over 40% in Q2. The Solar Ridge Hiker launched with much fanfare in New York City and posted 50% sell-through in North America. This group collectively represents nearly $550 million in revenue for the mid-to-high-teen growth profile longer term. The Smartwool brand is up nearly 60% [Phonetic] year-to-date, representing high-teens growth relative to fiscal 2020. The brand has grown nearly 30% year-to-date with balanced growth across its largest markets in Europe and the U.S. Base layers, tees and underwear represent about 70% of icebreaker global revenue confirming the consumer appeal of a 100% natural product in next-to-skin categories. Through the first half of the year, the brand has grown over 60% relative to fiscal 2020 and we expect this to accelerate into the back half of the year as the brand continues to expand its presence in road running with innovative new styles and designs. As a result, I'm proud of our ability to hold on to our fiscal 2022 earnings outlook of about $3.20 despite a more challenging than anticipated operating environment, including an incremental headwind of about $0.09 from expedited freight. However, the region was able to deliver 22% organic growth in Q2, representing continued sequential underlying improvement. The resurgence of COVID-19 lockdowns in key sourcing countries like Vietnam have resulted in more impactful production delays and the logistics network continues to face unprecedented challenges. Due to VF's large and strategically diversified sourcing footprint, our overall production capacity has remained better positioned than most with about 85% of production operational throughout the quarter. Pressures have generally concentrated in the southern region of Vietnam, which represents about 10% of VF's overall sourcing mix. In aggregate, supply delays are pervasive and, in some cases, have extended 8 weeks to 10 weeks. For example, the Supreme brand has experienced around 30% less inventory around drops. Our teams are leveraging VF's scale and relationships to navigate the challenging logistics environment in the most cost-effective way. Total VF revenue increased 21% to $3.2 billion despite a significant amount of orders shifted from Q2 into Q3, implying continued sequential underlying improvement for the portfolio. Our adjusted gross margin expanded 300 basis points to 53.9% due to higher full price realization, lower markdowns, favorable mix and around 20 basis points contribution from Supreme. When compared to prior peak gross margins in fiscal 2020, our current year gross margin was impacted by about 180 basis points headwind from incremental expedited freight and FX. Excluding these two items, our organic gross margin in Q2 is over 100 basis points above prior peak levels, driven by favorable mix and strong underlying margin rate improvement. Our SG&A ratio improved in Q2, down 100 basis points organically to 37.2% despite elevated distribution spend and continued growth in strategic investments. This strong underlying leverage was driven by discretionary choices and is a clear reflection of the optionality within our model, supporting organic earnings per share growth of 60%. I'm proud of our team's ability to deliver earnings of $1.11 in Q2 despite incremental expedited freight expense and significant wholesale shipment timing headwinds in the quarter, reflecting the strong underlying earnings momentum of the portfolio. We are holding our revenue guidance to be about $12 billion despite a weaker China outlook in the near term and a lower than expected back-to-school performance at Vans in the U.S. and ongoing supply chain challenges; all of this, highlighting the broad-based strength across our brands and geographies. Our gross margin outlook is now about 56%, including 40 basis points of incremental freight cost relative to what we had expected in July, implying an improving underlying gross margin outlook. And adjusting for incremental freight and FX, our fiscal 2022 outlook implies over 100 basis points of underlying gross margin expansion relative to peak gross margins in fiscal 2020, driven by favorable mix and clean full price sell-through. We are holding our operating margin outlook to around 13% for fiscal 2022 despite the incremental freight cost covered. Finally, as discussed, we are reaffirming our full year earnings outlook of around $3.20 despite about $0.09 of incremental costs directly attributed to the supply chain disruption; a strong testament of portfolio resiliency and the optionality of our model. Today, however, we have a much larger portion of our business performing at or above our expectations.

Over the past five years, we have strategically evolved and simplified our portfolio from 32 brands to 12 brands, each with significant D2C and international opportunity, squarely focused on large, growing addressable markets. As a result, I'm proud of our ability to hold on to our fiscal 2022 earnings outlook of about $3.20 despite a more challenging than anticipated operating environment, including an incremental headwind of about $0.09 from expedited freight. The resurgence of COVID-19 lockdowns in key sourcing countries like Vietnam have resulted in more impactful production delays and the logistics network continues to face unprecedented challenges. Our teams are leveraging VF's scale and relationships to navigate the challenging logistics environment in the most cost-effective way. Total VF revenue increased 21% to $3.2 billion despite a significant amount of orders shifted from Q2 into Q3, implying continued sequential underlying improvement for the portfolio. I'm proud of our team's ability to deliver earnings of $1.11 in Q2 despite incremental expedited freight expense and significant wholesale shipment timing headwinds in the quarter, reflecting the strong underlying earnings momentum of the portfolio. We are holding our revenue guidance to be about $12 billion despite a weaker China outlook in the near term and a lower than expected back-to-school performance at Vans in the U.S. and ongoing supply chain challenges; all of this, highlighting the broad-based strength across our brands and geographies. Finally, as discussed, we are reaffirming our full year earnings outlook of around $3.20 despite about $0.09 of incremental costs directly attributed to the supply chain disruption; a strong testament of portfolio resiliency and the optionality of our model. Today, however, we have a much larger portion of our business performing at or above our expectations.

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Before we discuss our results, I encourage you to review the cautionary statement on Slides 2 and 3 for our customary disclosures. Envestnet achieved strong adjusted revenue growth of 20% for the quarter and 18% year-to-date. We're already a market leader with $5.4 trillion in platform assets, but we can deliver consistently higher revenue growth by deepening our relationships, and offering new and better solutions to our over 108,000 financial advisors and our growing roster of more than 625 fintech firms. Over the last five years, Envestnet AUM/A organic growth rate has exceeded the managed account industry each and every year by approximately 500 basis points. We now have $5.4 trillion in assets across 108,000 advisors, an increase of $240 billion in assets over the last quarter. We are now opening more than 20,000 new accounts every week. We've also added several new large financial institutions over the quarter, which has helped us reach a total of 17.3 million accounts that we serve. In addition, the average number of accounts per advisor on our platform grew 9% year-over-year. These are personalized services like direct index portfolios, like sustainable investing strategies, which have grown by 86% year-over-year showing the increasing focus on ESG and impact investing. 19 new firms have enabled tax overlay to their advisors, and several hundred advisors used tax overlay for the first time since June 1. In September, we piloted our next generation proposal tool with over 100 clients of ours. There is real momentum in our efforts, as the Envestnet Insurance Exchange recently surpassed $1 billion in insurance assets served. Adjusted revenues for the third quarter grew 20% to $303 million, compared to the third quarter of last year. Adjusted EBITDA was down 2% to $66 million, compared to the third quarter of 2020, outpacing our expectations for the quarter, and at the same time, reflecting the impact of our investment initiatives. Adjusted earnings per share was $0.61. Quickly on the balance sheet, we ended September with approximately $394 million in cash, and debt of $860 million. Our net leverage ratio at the end of September was 1.7 times EBITDA. We continue to expect the investments to account for roughly $30 million of operating expense this year. We continue to expect the accelerated investments to annualize to a run rate of approximately $45 million in 2022, at which point they should be completely in our expense base and grow at the same rate of our operating expenses thereafter. But to summarize, for the fourth quarter, we expect adjusted revenues to be between $310 million and $312 million, up 17% to 18% compared to the fourth quarter of 2020. Adjusted EBITDA to be between $54 million and $55 million as we further ramp up the investments, and earnings per share to be $0.49. We expect adjusted revenues to be between $1,177 million and $1,179 million, up approximately 18% compared to 2020. Adjusted EBITDA to be between $259.5 million to $260.5 million, representing growth of 7% for the full year, when the midpoint of our initial expectation for EBITDA was to be down around 5%. EPS for the full year to be $2.41, which is $0.40 higher than the midpoint of our original guidance back in February. Second, our data and analytics segment has grown subscription revenue around 4% in the first nine months of the year, compared to the same period last year. As we continue to execute on our strategy in the coming years and benefit from the investments we're making now, we will capture more of the opportunities we've identified, positioning us to attain our longer-term targets of $2 billion of revenue, and adjusted EBITDA margin expanding into the 25% range by 2025.

Adjusted revenues for the third quarter grew 20% to $303 million, compared to the third quarter of last year. Adjusted earnings per share was $0.61. Adjusted EBITDA to be between $54 million and $55 million as we further ramp up the investments, and earnings per share to be $0.49.

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Fiscal 2021 was another record year for The Home Depot as we achieved the milestone of over $150 billion in sales. This resulted in double-digit comp growth for fiscal 2021 on top of nearly 20% comp growth that we delivered in fiscal 2020. We've grown the business by over $40 billion over the last two years. For context, prior to the pandemic, it took us nine years from 2009 to 2018 to grow the business by over $40 billion. Sales for the fourth quarter grew approximately $3.5 billion to $35.7 billion, up 10.7% from last year. comps of positive 7.6%. During the fourth quarter, our comp average ticket increased 12.3%. Comp transactions decreased 3.8%. Core commodity categories positively impacted our average ticket growth by approximately 185 basis points in the fourth quarter driven by inflation in lumber, building materials, and copper. For example, in the fourth quarter alone, the pricing for framing lumber ranged from approximately $585 to over $1,200 per 1,000 board feet, an increase of more than 100%. Big-ticket comp transactions or those over $1,000 were up approximately 18% compared to the fourth quarter of last year. Sales leveraging our digital platforms grew approximately 6% for the fourth quarter and approximately 9% for the year. Over the past two years, sales from our digital platforms have grown over 100%. Our focus on delivering a frictionless, interconnected shopping experience is resonating with our customers as approximately 50% of our online orders were fulfilled through our stores in fiscal 2021. 1 retailer for home improvement, and we look forward to serving our customers in the busy spring selling season. In the fourth quarter, total sales were $35.7 billion, an increase of approximately $3.5 billion or 10% -- 10.7% from last year. Our total company comps were positive 8.1% for the quarter with positive comps of 7.3% in November, 10.2% in December, and 7% in January. were positive 7.6% for the quarter with positive comps of 7.2% in November, 10.9% in December, and 5.4% in January. All 19 U.S. regions posted positive comps, and Canada and Mexico, both posted double-digit positive comps in the fourth quarter. For the year, our sales totaled a record $151.2 billion, with sales growth of $19 billion or 14.4% versus fiscal 2020. For the year, total company comp sales increased 11.4%, and U.S. comp sales increased 10.7%. In the fourth quarter, our gross margin was 33.2%, a decrease of approximately 35 basis points from last year. And for the year, our gross margin was 33.6%, a decrease of approximately 30 basis points from last year, primarily driven by product mix and investments in our supply chain network. During the fourth quarter, operating expenses were approximately 19.7% of sales, representing a decrease of approximately 120 basis points from last year. Our operating leverage during the fourth quarter reflects comparisons against significant COVID-related expenses that we incurred in the fourth quarter of 2020 to support our associates, the anniversarying of $110 million of non-recurring expenses related to the completion of the HD Supply acquisition in the fourth quarter of 2020, and solid expense management for the quarter. During the fourth quarter of fiscal 2021, we also incurred approximately $125 million of COVID-related expenses. For the year, operating expenses were approximately 18.4% of sales, representing a decrease of approximately 170 basis points from fiscal 2020. Our operating margin for the fourth quarter was approximately 13.5% and for the year was approximately 15.2%. In the fourth quarter, our effective tax rate was 25.5% and for fiscal 2021 was 24.4%. Our diluted earnings per share for the fourth quarter were $3.21, an increase of 21.1% compared to the fourth quarter of 2020. Diluted earnings per share for fiscal 2021 were $15.53, an increase of 30.1% compared to fiscal 2020. During the year, we opened seven new stores and added 14 new stores through a small acquisition, bringing our store count to 2,317 at the end of fiscal 2021. Retail selling square footage was approximately 241 million square feet at the end of fiscal 2021. Total sales per retail square foot were approximately $605 in fiscal 2021, the highest in our company's history. At the end of the quarter, merchandise inventories were $22.1 billion, an increase of $5.4 billion versus last year. And inventory turns were 5.2 times, down from 5.8 times from the same period last year. During the fourth quarter, we invested approximately $830 million back into our business in the form of capital expenditures. This brings total capital expenditures for fiscal 2021 to $2.6 billion. During the year, we paid approximately $7 billion of dividends to our shareholders. And today, we announced our board of directors increased our quarterly dividend by 15% to $1.90 per share, which equates to an annual dividend of $7.60. And finally, during fiscal 2021, we returned approximately $15 billion to our shareholders in the form of share repurchases, including $4.5 billion in the fourth quarter. Computed on the average of beginning and ending long-term debt and equity for the trailing 12 months, return on invested capital was 44.7%, up from 40.8% in the fourth quarter of fiscal 2020. On average, homeowners' balance sheets continue to strengthen as the aggregate value of U.S. home equity grew approximately 35% or $6.5 trillion since the first quarter of 2019. We adjust this dollar run rate for our historical seasonality to calculate our sales outlook for 2022. Based on this approach and assuming there are no material shifts in demand, we calculate that sales growth and comp sales growth will be slightly positive for fiscal 2022. We expect our 2022 operating margin to be flat to 2021. And we would expect low single-digit percentage growth in diluted earnings per share compared to fiscal 2021. Over the course of fiscal 2022, we plan to invest approximately $3 billion back into our business in the form of capital expenditures, in line with our annual expectation of approximately 2% of sales going forward. We have a team of approximately 500,000 associates who are committed to the culture that our founders instilled in our business over 40 years ago. 1 retailer for home improvement. We've seen several inflection points in our company's history, all spurred by a desire to maintain the growth mentality and entrepreneurial spirit created by Bernie and Arthur when they revolutionized the home improvement industry over 40 years ago. Approximately 15 years ago, we pivoted from new stores as a driver of growth to growth driven by productivity. We could have never predicted the more than $40 billion in growth since the end of 2019. Aligned with these objectives, our goals are: first, to grow the business to $200 billion in sales, which represents incremental growth of approximately $50 billion from where we are today; and second, and just as importantly, deliver best-in-class operating profit dollar growth and return on invested capital. Over the last two years, as we've grown by over $40 billion in sales, our addressable market has also grown. We now estimate that our total addressable market in North America is greater than $900 billion. We estimate that each of these respective customer groups represent about 50% of the total addressable market. We also estimate that each of these important customer groups represent approximately 50% of our total sales. For Pro, we believe this addressable end market is over $450 billion. Within this end market, we believe our addressable maintenance, repair, and operations, or MRO space, has expanded to over $100 billion. 1 home improvement retailer across all of our geographies, we represent a relatively small part of a large and fragmented total addressable market that has expanded significantly over the past two years. At this point, we saw their spend with The Home Depot grow to more than $100,000 annually but still for mostly unplanned immediate need purchases in store. As a result, we've seen spend with this customer more than triple to over $300,000 annually. We believe the ability to serve our Pros' planned and unplanned purchase occasions will be an important driver of growth as we work toward a $200 billion sales milestone. When I think about our stores, I think about the tremendous amount of productivity over the years, all of which helped us achieve over $600 in sales per retail square foot in 2021. As we set our sights on our goal of $200 billion in sales, we have many opportunities to improve freight flow throughout the store and drive further space optimization in SKU productivity. When our founders started The Home Depot over 40 years ago, they transformed an industry.

Sales for the fourth quarter grew approximately $3.5 billion to $35.7 billion, up 10.7% from last year. comps of positive 7.6%. In the fourth quarter, total sales were $35.7 billion, an increase of approximately $3.5 billion or 10% -- 10.7% from last year. Our total company comps were positive 8.1% for the quarter with positive comps of 7.3% in November, 10.2% in December, and 7% in January. were positive 7.6% for the quarter with positive comps of 7.2% in November, 10.9% in December, and 5.4% in January. Our diluted earnings per share for the fourth quarter were $3.21, an increase of 21.1% compared to the fourth quarter of 2020. And today, we announced our board of directors increased our quarterly dividend by 15% to $1.90 per share, which equates to an annual dividend of $7.60. And finally, during fiscal 2021, we returned approximately $15 billion to our shareholders in the form of share repurchases, including $4.5 billion in the fourth quarter. We adjust this dollar run rate for our historical seasonality to calculate our sales outlook for 2022. Based on this approach and assuming there are no material shifts in demand, we calculate that sales growth and comp sales growth will be slightly positive for fiscal 2022. We expect our 2022 operating margin to be flat to 2021. And we would expect low single-digit percentage growth in diluted earnings per share compared to fiscal 2021. Approximately 15 years ago, we pivoted from new stores as a driver of growth to growth driven by productivity.

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Diluted GAAP earnings per common share was $3.33 for the first quarter of 2021, compared with $3.52 in the fourth quarter of 2020 and $1.93 in last year's first quarter. Net income for the quarter was $447 million, compared with $471 million in the linked quarter and $269 million in the year-ago quarter. On a GAAP basis, M&T's first-quarter results produced an annualized rate of return on average assets of 1.22% and an annualized return on average common equity of 11.57%. This compares with rates of 1.30% and 12.07%, respectively, in the previous quarter. Included in GAAP results in the recent quarter were after-tax expenses from the amortization of intangible assets amounting to $2 million or $0.02 per common share, little change from the prior quarter. Also included in the quarter's results were merger-related charges of $10 million related to M&T's proposed acquisition of People's United Financial. This amounted to $8 million after tax or $0.06 per common share. Net operating income for the first quarter, which excludes intangible amortization and the merger-related expenses, was $457 million, compared with $473 million in the linked quarter and $272 million in last year's first quarter. Diluted net operating earnings per share were $3.41 for the recent quarter, compared with $3.54 in 2020's fourth quarter and $1.95 in the first quarter of last year -- of last year. Net operating income yielded annualized rates of return on average tangible asset and average tangible common shareholders' equity of 1.29% and 17.05% for the recent quarter. The comparable returns were 1.35% and 17.53% in the fourth quarter of 2020. Taxable equivalent net interest income was $985 million in the first quarter of 2021, compared with $993 million in the linked quarter. The margin for the past quarter was 2.97%, down 3 basis points from 3% in the linked quarter. The primary driver of the margin decline was the higher level of cash on deposit with the Federal Reserve, which we estimated reduced the margin by 5 basis points. Similarly, the $8 million linked-quarter decline in net interest income reflects the loss of income from two fewer accrual days. Compared with the fourth quarter of 2020, average interest-earning assets increased by some 2%, reflecting a 9% increase in money market placements, including cash on deposit with the Federal Reserve, and an 8% decline in investment securities. Average loans outstanding grew by – grew nearly 1% compared with the previous quarter. Excluding PPP loans, average loans grew $1.1 billion or over 1%. Due to timing of originations and the receipt of payments, average PPP loans declined $453 million from the prior quarter. Commercial real estate loans declined less than 0.5% compared to the fourth quarter, indicative of very low levels of customer activity. Residential real estate loans grew by 4%, consistent with our expectations. Consumer loans were up nearly 1%. On an end-of-period basis, PPP loans totaled $6.2 billion, up from $5.4 billion at the end of the fourth quarter. Average core customer deposits, which exclude deposits received at M&T's Cayman Island office and CDs over $250,000, increased 4% or $5 billion compared to the fourth quarter. That figure includes $4 billion of noninterest-bearing deposits. On an end-of-period basis, core deposits were up nearly $9 billion. Foreign office deposits increased 17% on an average basis but were -- I'm sorry, decreased 17% on an average basis but were essentially flat on an end-of-period basis. Turning to noninterest income, noninterest income totaled $506 million for the first quarter, compared with $551 million in the linked quarter. The recent quarter included $12 million of valuation losses on equity securities, largely the remaining holdings of our GSE preferred stock, while 2020's final quarter included $2 million of gains. Results for the first quarter of 2020 included a $23 million distribution and a change in the past timing. As you may know, M&T received a $30 million distribution in the fourth quarter of 2020, as expected. Mortgage banking revenues were $139 million in the recent quarter, down $1 million from $140 million in the linked quarter. Revenues from that business, including both originations and servicing activities, were $107 million in the first quarter, improved from $95 million in the prior quarter. Residential mortgage loans originated for sale were $1.3 billion in the recent quarter, up about 5% from the fourth quarter. Commercial mortgage banking revenues were $32 million in the first quarter, reflecting the -- a seasonal decline from $45 million in the linked quarter. That figure was $30 million in the year-ago quarter. Trust income rose to $156 million in the recent quarter, improved from $151 million in the previous quarter. Service charges on deposits were $93 million, compared with $96 million in the fourth quarter. Operating expenses -- turning to operating expenses for the first quarter, which exclude the amortization of intangible assets and merger-related expenses, were $907 million. The comparable figures were $842 million in the linked quarter and $903 million in the year-ago quarter. As is typical for M&T's fiscal first-quarter results, operating expenses for the recent quarter included approximately $69 million of seasonally higher compensation costs relating to accelerated – to the accelerated recognition of equity compensation expense for certain retirement-eligible employees, the HSA contribution, the impact of annual incentive compensation payouts on the 401(k) match and FICA payments, and unemployment insurance. Those same items amounted to an increase in salaries and benefits of approximately $67 million in last year's first quarter. Other cost of operations for the past quarter included a $9 million reduction in the valuation allowance on our capitalized mortgage servicing rights. You'll recall that there was a $3 million addition to the allowance in 2020's fourth quarter and a $10 million addition in last year's first quarter. The efficiency ratio, which excludes intangible amortization from the numerator and securities gains or losses from the denominator, was 60.3% in the recent quarter compared with 54.6% in 2020's fourth quarter and 58.9% in the first quarter of 2020. The allowance for credit losses amounted to $1.6 billion at the end of the first quarter. The $100 million decline from the end of 2020 reflects a $25 million recapture of previous provisions for credit losses, combined with $75 million of net charge-offs in the first quarter. Our forecast assumes that the national unemployment rate continues to be at elevated levels, on average, 5.7% through 2021, followed by a gradual improvement, reaching 2.4% by the end of 2022. I'm sorry, 4.2% by the end of 2022. The forecast assumes that GDP grows at 6.2% annual -- at annual rate during 2021, resulting in GDP returning to pre-pandemic levels during 2021. Nonaccrual loans amounted to $1.9 billion or 1.97% of loans at the end of March. This was up slightly from 1.92% at the end of last December. As noted, net charge-offs for the recent quarter amounted to $75 million. Annualized net charge-offs as a percentage of total loans were 31 basis points for the first quarter compared with 39 basis points in the fourth quarter. Loans 90 days past due, on which we continue to improve interest, were $1.1 billion at the end of the recent quarter, 96% of those loans were guaranteed by government-related entities. M&T's common equity Tier 1 ratio was an estimated 10.4% compared with 10% at the end of the fourth quarter, and which reflects a slight reduction in risk-weighted assets and earnings net of -- and earnings net of dividends.

Diluted GAAP earnings per common share was $3.33 for the first quarter of 2021, compared with $3.52 in the fourth quarter of 2020 and $1.93 in last year's first quarter. Diluted net operating earnings per share were $3.41 for the recent quarter, compared with $3.54 in 2020's fourth quarter and $1.95 in the first quarter of last year -- of last year. Taxable equivalent net interest income was $985 million in the first quarter of 2021, compared with $993 million in the linked quarter. The $100 million decline from the end of 2020 reflects a $25 million recapture of previous provisions for credit losses, combined with $75 million of net charge-offs in the first quarter. As noted, net charge-offs for the recent quarter amounted to $75 million.

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Adjusted EBITDA in the second quarter topped $117 million. Free cash flow in the quarter approached $70 million after funding capex of 77 million. Net debt improved by 58 million in the second quarter, driven by our free cash flow. First, our leading daily margin performance in the Lower 48; second, the upturn in our international business; third, the improving outlook for our technology and innovation; fourth, progress on our commitment to delever; and fifth, our progress in ESG and the energy transition. Let me start with Lower 48 drilling margins. Daily margin once again exceeded $7,000 mark. Another way to look at our performance is to combine our drilling margin with the margins generated by NDS in the Lower 48. That increment amounts to approximately $1,900 per day, so we're generating almost $9,000 per rig per day on this basis. These markets collectively account for approximately 25% of our international rig count. We currently have 38 rigs working in the Kingdom. They are estimated to contribute approximately annualized EBITDA exceeding $50 million. As you know, there is a long-term plan by Saudi Aramco to add successive generations of five rigs per year for an additional 45 rigs. The Saudi Aramco procedure of this plan, we expect a similar EBITDA contribution in each successive year. NDS' penetration on our own Lower 48 rigs with at least five services exceeded 70%. Revenue on third-party rigs increased sequentially by more than 50%. This sale will result in cash proceeds of approximately $94 million, plus we will liquidate the working capital in the business. The quarter began with WTI just below $60 for early June WTI broke above 70. This range should be conducive to increases in drilling activity across markets. Comparing the averages of the second quarter to the first quarter, the baker Lower 48 land rig count increased by 16%. According to Inverness, from the beginning of the second quarter through the end the Lower 48 rig count increased by 31 or approximately 6%. The growth rate among smaller clients significantly outpaced the growth in larger operators at 8% versus 2%. With our focus across the spectrum of clients, our average working rig count in the second quarter increased by 21%. Once again, we surveyed the largest Lower 48 clients. This group accounts for approximately 35% of the working rig count. In comparison on the last call, the same group accounted for 40% of the working rig count. The net loss from continuing operations of $196 million in the second quarter represented a loss of $26.59 per share. Results from the quarter included a net loss of $81 million or $10.80 per share related to onetime impairments, which were largely attributable to the sale of our Canada drilling assets and to reserves for tax contingencies in our international segment. Second-quarter results compared to a loss of $141 million or $20.16 per share in the first quarter. Excluding the previously mentioned onetime items, the $26 million quarterly improvement primarily reflects better operational results, as well as lower depreciation and income tax expenses. Revenue from operations for the second quarter was $489 million, a 6% improvement compared to the first quarter. Total adjusted EBITDA expanded by almost $10 million to $117 million for the quarter. This quarterly improvement is part of a trend that we expect to continue during the second half of the year. drilling adjusted EBITDA of $59.8 million was up by 1 million or 1.7% sequentially and a 14% increase in revenue. Although our rig count increased, our average margins fell in the Lower 48 market. Lower 48 performance was in line with our expectations. Daily rig margins came in at $7,017 and falling within our expected range. Second-quarter Lower 48 rig count averaged 63.5 and a quarterly increase of 13%, which was somewhat above our expectations. Currently, our rig count stands at 67. International-adjusted EBITDA gained almost $9 million in the second quarter or 14% sequentially. The unfavorable impact to our margins from these moves was $3.7 million in the second quarter and is forecast at $6 million in the third quarter. Also, we lost $1.9 million of revenue in the second quarter related to the general strikes and unrest in Latin America. Average rig count increased in line with expectation by 3.5 rigs to 68.3 or 5%. Current rig count in the international segment is 68. Daily gross margin for international increased by over $500 to 13,420 in the second quarter beating our expectations by more than $900. The second quarter included approximately $900 per day in lost margin from the moves in Mexico and in rest in Latin America. Our third quarter forecast includes approximately $1,000 in early termination fees from one of our rigs, offset by additional lost margin from the moves in Mexico. As anticipated, Canada-adjusted EBITDA of $3 million fell by 6.7 million, reflecting the seasonal spring breakup. Drilling solutions adjusted EBITDA of $12.8 million was up 1.3 million in the second quarter and a 10% revenue increase, trending positively in all product lines. Penetration of the performance drilling software in the Lower 48 and TRS internationally, strengthened driving the improvement. Lower 48 gross margin for our drilling solutions segment totaled $8.9 million for the second quarter. This comes on top of our Lower 48 drilling gross margin of $40.5 million. Rig technologies generated adjusted EBITDA of $2 million in the second quarter, an improvement of $2.6 million on a 34% revenue increase. In the second quarter, total free cash flow was $68 million. This compares to free cash flow of approximately 60 million in the first quarter. Capital expenses in the second quarter of $77 million were up from $40 million in the first quarter. These amounts include investments for the newbuilds of 32 million and 8 million for the second and first quarter, respectively. In the third quarter, we forecast $80 million in capital expenditures including 35 million Versata newbuilds. Our targeted capital spending for 2021 continues to be around $200 million, excluding approximately 100 million required for Saudi new builds. Free cash flow for the third quarter should total around 10 to $20 million, excluding proceeds from the Canada divestiture and moderate strategic transaction outflows. At the end of the second quarter, our cash balance closed at $400 million, and the amount drawn on our 1 billion credit facility was $558 million. Our net debt on June 30th was $2.4 billion, down from 2.9 billion at the start of the pandemic. Putting things in perspective, the last 15 months have probably been some of the toughest Nabors has faced. Together with our superior operational results, we generated meaningful cash flow for the past 15 months, while also reducing our net debt by $500 million during the period. Despite the headwinds at the beginning of last year, just before the pandemic, we also issued $1 billion of new long-term debt to address near-term maturities.

The Saudi Aramco procedure of this plan, we expect a similar EBITDA contribution in each successive year. This range should be conducive to increases in drilling activity across markets. The net loss from continuing operations of $196 million in the second quarter represented a loss of $26.59 per share. Revenue from operations for the second quarter was $489 million, a 6% improvement compared to the first quarter. This quarterly improvement is part of a trend that we expect to continue during the second half of the year.

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We set the bar for new operational and financial records every quarter during the year, culminating in our all-time highest annual sales orders and home closings, and in turn our best average absorption pace of 5.2 per month since 2005. We closed our 135,000th home. And as the industry leader in energy efficiency, we were the first homebuilder to introduce MERV-13 nationwide, the most advanced air filtration system offered today for residential construction, which controls and improves air exchange within the home. In keeping with our commitment to innovation and enhancing the customer experience, we rolled out 100% contactless selling to our customers. In line with our dedication to fostering healthy communities in which we live and work, we donated over $0.5 million to our Meritage Care Foundation to nonprofits like Feeding America and Americares that are focused on helping those affected by COVID-19, fighting hunger and combating homelessness. And to promote racial equity nationwide, we donated $200,000 to INROADS and the United Negro College Fund and began our multiyear partnership with these organizations. We sold 3,174 homes this quarter, which was 52% higher than the same quarter of 2019. Home closing revenue of $1.4 billion in the current quarter increased 28% year-over-year. In the fourth quarter of 2020, we delivered our best quarterly home closing gross margins in 2006 by improving 420 bps to 24% from 19.8% in the prior year. Capitalizing on the overall industry demand as well as the expansion of our community mix toward entry-level homes, which sell at a higher pace than our first move homes, our absorption of 5.3 per month for the quarter was up 87% year-over-year, even as we increased pricing in all of our geographies in line with strong local market demand. five out of the nine states had absorptions increase over 100% year-over-year this quarter, despite a 19% decline in average active communities. Entry-level comprised almost 70% of total orders for the quarter, up from 55% in the fourth quarter last year. Entry-level represents 67% of our average active communities during the current quarter compared to 45% a year ago. Our first move communities also experienced improved demand year-over-year, with absorption 91% higher than a year ago. Our East region led in terms of order growth, with a 76% improvement over the fourth quarter of 2019. Absorption in the East region increased 118% year-over-year for the quarter, offset by a 20% decline in average community count. 64% of our average active communities in each region sold entry-level product during the quarter. Our Central region, comprising our Texas market, increased orders by 46% over the fourth quarter of 2019, despite a 20% reduction in average community count. Entry-level communities represented 71% of the Central region's average active community during the fourth quarter of 2020. Our fourth quarter 2020 orders in the West region were up 34% over the same quarter in the prior year, driven by a 65% increase in absorptions and partially offset by 18% fewer average communities. Entry-level communities represented 67% of the West region's average active communities during the quarter. Colorado had our highest first order absorption in the company this quarter, with an average of 6.4 homes per month in the fourth quarter of 2020 compared to 2.5 in the prior year. This produced a 48% year-over-year growth in orders, reflecting the hard shift down to ASP price band over the last four to six quarters. We closed 32% more homes in the fourth quarter of 2020 than prior year. And our backlog was 4,672 units at the end of the fourth quarter, reflecting the high absorption pace we achieved this quarter. Of the 3,744 home closings this quarter, 71% came from previously started spec inventory compared to 61% a year ago. At December 31, 2020, less than 10% of total specs were completed versus 1/3, which is our typical run rate. Our backlog conversion rates decreased to 71% in the fourth quarter this year compared to 80% last year, reflecting the early stages of construction in our sold homes. We ended the fourth quarter of 2020 with a little over 2,500 spec homes in inventory or an average of 12.9 per community compared to approximately 3,000 or an average of 12.4 last year, reflecting the significant sales order growth during the fourth quarter. While specs for community grew, our total staff count did not quite achieve our goal of 3,000 as these homes converted to backlog as quickly as we started them. As Philippe noted, the 28% year-over-year closing revenue growth in the fourth quarter was the net impact of 32% increase in home closings and 4% decline in ASP. We had our highest quarterly home closing gross revenue since 2006 this quarter, reaching 24%, a 420 bps improvement from the prior year. SG&A as a percentage of home closings revenue was 9.3% for the current quarter, which was our lowest quarterly percentage since 2007. The 80 bps improvement over prior year reflects greater leverage of fixed expenses from efficiencies and higher closing revenue and ongoing permanent cost benefits from technology enhancements, particularly leading to our sales and marketing efforts. Included in our Q4 results are $20.3 million of impairment charges on land sales. The fourth quarter's effective income tax rate was 21.9% in 2020 compared to 6.3% in the prior year. Our fourth quarter diluted earnings per share was $3.97, increasing 50% year-over-year compared to 2.65% in the same quarter of 2019. To highlight just a few items for the full year 2020 results: On a year-over-year basis, we generated a 70% increase in net earnings. Orders were up 43%, and closings were up 28%. We delivered $4.5 billion in full year home closing revenue, a 310 bps increase in home closing gross margin to 22%, and a 90 bps improvement in SG&A as a percentage of home closing revenue, ending the year at 10%. We opportunistically repurchased 100,000 shares for a total of $8.8 million in advance of the routine first quarter employee share issuance in 2021. On November 13, 2020, our Board of Directors authorized an additional $100 million for share repurchases under the existing stock repurchase program. At December 31, 2020, our cash balance was $746 million, reflecting positive cash flow from operations of $530 million despite increased land acquisition and development spend. Our net debt to cap reached an all-time low of 10.5%. We spent $506 million on land and development this quarter, our highest spend in a single quarter in the company's history and over a 100% increase year-over-year. For full year 2020, we invested nearly $1.3 billion in land and development. We anticipate spending more than $1.5 billion annually in 2021 and beyond to sustain and replenish our 300 communities. In the fourth quarter of 2020, we secured a quarterly record of approximately 11,200 new lots, which translates to 69 new communities. We put nearly 29,500 gross new lots under control in 2020, a 62% increase as compared to about 18,000 lots in 2019. Adjusting for land sales and termination, we secured approximately 27,200 net new lots in 2020, representing 192 new communities, of which approximately 81% are entry level. At year-end with over 55,500 total lots under control, we had 4.7 years' supply of lots based on trailing 12-month closings, in line with our target of four to five years' supply of lots on hand. We increased our land book by 34% from December 31, 2019. About 59% of our total inventory at December 31, 2020, was owned and 41% was optioned, an improvement compared to the prior year of 63% owned and 37% optioned. For full year 2020, our new lots under control have an average community size of about 140 lots. For full year 2021, we are projecting total closings to be between 11,500 and 12,500 units, total home closing revenue of $4.2 billion to $4.6 billion, home closing gross margin of 22% to 23%, and effective tax rate of about 23%, and diluted earnings per share in the range of $10.50 to $11.50. We ended 2020 with 195 active communities, down from 244 in the prior year. During the year, we opened up 105 communites, up 40% from 75% in 2019. Since we anticipate continued strong sales demand in 2021, community count will remain plus-minus 200 for Q1 and Q2 as new community openings will be offset by community closings. And our projected volume of closings between 11,500 and 12,500 for the full year, we expect to end 2021 with approximately 235 to 245 communities. The community count growth will continue into Q1 and Q2 of '22 when we anticipate achieving our goal of operating 300 communities by June 2022. As for Q1 2021, we are projecting total closings to be between 2,600 and 2,900 units, home closing revenue of $950 million to $1.05 billion, home closing gross margin of approximately 22.5%, and diluted earnings per share in the range of $2.25 to $2.50. In the fourth quarter, we spent a record $506 million on land and secured approximately 11,200 new lots. We already control all the land necessary to achieve our 300 active community goal by mid-2022. To summarize on slide 13, we are entering 2021 with a heavy backlog of almost 4,700 sold homes and more than 2,500 specs completed or under construction, giving us some additional visibility in 2021.

We sold 3,174 homes this quarter, which was 52% higher than the same quarter of 2019. Of the 3,744 home closings this quarter, 71% came from previously started spec inventory compared to 61% a year ago. Our fourth quarter diluted earnings per share was $3.97, increasing 50% year-over-year compared to 2.65% in the same quarter of 2019. For full year 2021, we are projecting total closings to be between 11,500 and 12,500 units, total home closing revenue of $4.2 billion to $4.6 billion, home closing gross margin of 22% to 23%, and effective tax rate of about 23%, and diluted earnings per share in the range of $10.50 to $11.50. And our projected volume of closings between 11,500 and 12,500 for the full year, we expect to end 2021 with approximately 235 to 245 communities.

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The dedication of our employees and our sustained investments in technology allowed us to convert roughly 9,000 employees, 2.6 million customers, and nearly 600 branches across seven states. We're bringing our technology talent and the full suite of best-in-class products and services to 29 of the nation's 30 largest markets with attractive growth opportunities, as you've heard me talk about it for years to come. That said, total PNC legacy loans, if we back out that PPP runoff, actually grew almost 5 billion with growth in both commercial and consumer categories and while the environment is still challenging we're actually pretty encouraged by what we're seeing on the corporate side. As Bill just mentioned, and notable during the third quarter we converted the BBVA USA franchise to the PNC platform in less than 11 months, following the announcement of the deal. As loans grew $36 billion, securities increased $12 billion, and deposits grew $53 billion. Total spot loans declined $4.5 billion or 2% linked quarter. Investment securities declined approximately $900 million or 1% as we slowed purchase activity throughout much of the quarter during the relatively unattractive rate environment. Our cash balances at the Federal Reserve continue to grow and enter the third quarter at $75 billion. On the liability side, deposit balances were $449 billion on September 30th and declined $4 billion reflecting the repositioning of certain BBVA USA portfolios. We ended the quarter with a tangible book value of $94.82 per share and an estimated CET1 ratio of 10.2%. During the quarter, we return capital to shareholders with common dividends of $537 million and share repurchases of $393 million. Average loans increased $36 billion linked quarter to $291 billion reflecting the full quarter impact of the acquisition. Taking a closer look at the linked quarter change in our spot balances total loans declined $4.5 billion. The PNC legacy portfolio excluding PPP loans grew by $4.7 billion or 2% with growth in both commercial and consumer loans. PNC legacy commercial loans grew $3.7 billion driven by growth within corporate banking and asset-based lending. Within the BBVA USA portfolio, loans declined $4.4 billion primarily due to intentional runoff relating to the overlapping exposures and nonstrategic loans. Looking ahead we have approximately $5 billion of additional BBVA USA loans that we intend to let roll off over the next few years, which is in line with our acquisition assumptions. Finally, PPP loans declined $4.8 billion due to forgiveness activity and as of September 30th, $6.8 billion of PPP loans remain on our balance sheet. Moving to Slide 5, average deposits of $454 billion increased $53 billion compared to the second quarter driven by the acquisition. On the right, you can see total period-end deposits were $449 billion dollars on September 30th, a decline of $4 billion or 1% linked quarter. Inside of this PNC legacy deposits increased $5.4 billion, as deposits continue to grow reflecting the strong liquidity position of our customers. BBVA USA deposits declined approximately $9.4 billion during the third quarter, which was anticipated as we rationalize the rate paid on certain acquired commercial deposit portfolios and exited several noncore deposit-related businesses. With the increase in rates at the end of the third quarter, we resumed our increased levels of purchasing including $5.4 billion of forward-settling security, which will be reflected in the fourth quarter. Average security balances now represent approximately 24% of interest-earning assets and we still expect to be in the range of approximately 25% to 30% by year-end. The reported earnings per share with $3.30 which included pre-tax integration costs of $243 million. Excluding integration, costs adjusted earnings per share with $3.75. Third-quarter revenue was up 11% compared with the second quarter reflecting the acquisition as well as strong organic feed growth. Expenses increased $537 million or 18% linked quarter. Including $235 million of integration expenses and two additional months of BBVA USA operating expense. Legacy PNC expenses increased $76 million or 2.7%. Pretax pre-provisioned earnings excluding integration costs were $1.9 billion and $25 million, or 7%. The provision recapture of $203 million was primarily driven by improved credit quality and changes in portfolio composition and our effective tax rate with 17.8%. For the full year, we expect our effective tax rate to be approximately 17%. As a result, total net income was $1.5 billion in the third quarter. In total, revenue of $5.2 billion increased $530 million linked quarter. Net interest income of $2.9 billion was up $275 million or 11%, reflecting the full quarter benefit of the earning asset balances acquired from BBVA USA. Inside of that interest income on loans increased $277 million or 13% while investment securities income declined $9 million, driven by elevated premium amortization on the acquired BBVA USA portfolio. Net interest margin of 2.27% was down 2 basis points driven primarily by lower security yield. The third-quarter fee income of $1.9 billion increased $274 million or 17% linked quarter. BBVA USA contributed fee income of $184 million, an increase of $122 million linked quarter driven by two additional months of operating results. Legacy PNC fees grew by $152 million linked quarter were 10%, driven by higher corporate service fees related to recording M&A advisory activity, as well as growth in residential mortgage revenue. Other noninterest income of $449 million, decreased $19 million linked quarter as higher private equity revenue was more than offset by the impact of $169 million negative visa derivative adjustments. Turning to Slide 9, our third-quarter expenses were up by $537 million or 18% linked quarter. The increase was primarily driven by the impact of higher BBVA USA expenses of $327 million and higher integration expenses of $134 million. PNC legacy expenses increased $76 million or 2.7% due to higher incentive compensation commensurate with a strong performance in our fee businesses including a record quarter in M&A advisory fees. Our efficiency ratio adjusted for integration costs was 64%. And as we've stated previously we have a goal to reduce PNC stand-alone expenses by $300 million in 2021 through our continuous improvement program, and we're on track to achieve our full-year targets. Additionally, we're confident we'll realize the full $900 million and net expense savings off of our forecast of BBVA USA 2022 expense base, and expect virtually all of the actions that drive the $900 million of savings to be completed by the end of 2021. We still expect to incur integration costs of approximately $980 million related to the acquisition. Nonperforming loans of $2.5 billion decreased $251 million or 9% compared to June 30th and continue to represent less than 1% of total loans. Total delinquencies of $1.4 billion that September 30th increase a $106 million or 8%. However, this increase includes approximately $75 million of operational delays in early stage delinquencies primarily related to BBVA USA acquired loans. Excluding these total delinquencies would have increased $31 million or 2%. Net charge offs for loans and leases were $81 million a decline of $225 million linked quarter. The second quarter included $248 million of charge offs related to BBVA USA loans. Our annualized net charge offs loans in the third quarter was 11 basis points. During the third quarter are allowance for credit losses declined $374 million primarily driven by improvement in credit quality, as well as changes in portfolio composition. At quarter-end, our reserves were $6 billion representing 2.0 -- 2.07% of loans. In regard to our view of the overall economy, after somewhat slower growth during the third quarter of 2021 due in part to the delta variant and supply chain problems, we expect GDP to accelerate to above 6% annualized in the fourth quarter. Looking at the fourth quarter of 2021, compared to the recent third-quarter results, we expect the average loan balances excluding PPP to be up modestly, we expect NII to be up modestly, on a percentage basis, we expect fee income to be down between 3% and 5%, mostly reflecting the elevated third quarter M&A activity. We expect other noninterest income to be between $375 and $425 million excluding net securities and fees activities. On [Audio gap] percent, we expect total noninterest expense to be down between 3% and 5% excluding integration expense, which we approximate to be $450 million during the fourth quarter and we expect fourth-quarter net charge offs to be between $100 and $150 million.

We ended the quarter with a tangible book value of $94.82 per share and an estimated CET1 ratio of 10.2%. Excluding integration, costs adjusted earnings per share with $3.75. As a result, total net income was $1.5 billion in the third quarter. In total, revenue of $5.2 billion increased $530 million linked quarter. Net interest income of $2.9 billion was up $275 million or 11%, reflecting the full quarter benefit of the earning asset balances acquired from BBVA USA.

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Geographically, sequential growth in North America exceeded rig activity, growing in excess of 20% offshore and international revenue growth accelerated, closing the second half of 2021, up 12% versus the prior year. All international areas posted growth, driven by gains in more than 75% of our international business units. well construction and reservoir performance, our predominantly service-oriented Divisions, outperformed expectations with strong sequential growth and approximately 30% growth year over year on a pro forma basis. And finally, we generated outstanding cash flow from operation exceeding $1.9 billion in the quarter. At the end of 2021, we have more than 240 commercial DELFI customers, recorded more than 160% DELFI user growth year over year and saw a more than tenfold increase in compute-cycle intensity on our DELFI cloud platform. We announced our comprehensive 2050 net-zero commitment, inclusive of Scope 3 emissions and launched the Transition Technologies portfolio to focus on the decarbonization of oil and gas operations with much success. In essence, 2022 will be a period of stronger short-cycle activity resurgence driven by improved visibility in the demand recovery and greater confidence in the oil price environment. And as oil demand exceeds prepandemic levels in 2023 and beyond, long cycle development will augment capital spending growth in response to the current supply. Turning to 2022, more specifically, we expect an increase in capital spending of at least 20% in North America, impacting both the onshore and offshore markets, while internationally, capital spending is projected to increase in the low-to-mid teens, building momentum from a very strong exit in the second half of 2021. In this scenario, increased activity and pricing will drive simultaneous double-digit growth both internationally and in North America that will lead our overall 2022 revenue growth to reach mid-teens. Our ambition is to, once again, expand operating and EBITDA margins on a full year basis, exiting the year with EBITDA margins at least 200 bps higher than the fourth quarter of 2021. This growth and margin expansion trajectory gives us further confidence that we will reach or exceed our mid-cycle ambition of 25% adjusted EBITDA margin before the end of 2023, leading to adjusted EBITDA that should visibly exceed 2019 levels in dollar terms. Fourth quarter earnings per share excluding charges and credits was $0.41. This represents an increase of $0.05 compared to the third quarter of this year and $0.19 when compared to the same period of last year. In addition, we recorded a net credit of $0.01 bringing GAAP earnings per share to $0.42. This consisted of a $0.02 gain relating to the sale of a portion of our shares in Liberty Oilfield Services, offset by a $0.01 loss relating to the early repayment of $1 billion of notes. Overall, our fourth quarter revenue of $6.2 billion increased 6% sequentially. All divisions posted sequential growth, led by digital and integration. From a geographical perspective, International revenue grew 5%, while North America grew 13%. Pretax operating margins improved 31 basis points sequentially to 15.8% and have increased for six quarters in a row. Companywide adjusted EBITDA margin remained strong at 22.2%, which was essentially flat sequentially. Fourth quarter digital and integration revenue of $889 million increased 10% sequentially with margins growing by 268 basis points to 37.7%. Reservoir performance growth further accelerated in the fourth quarter with revenue increasing 8% sequentially to $1.3 billion. Margins were essentially flat at 15.5% as a result of seasonality effects and technology mix, largely driven by the end of summer exploration campaigns in the Northern Hemisphere. Well construction revenue of $2.4 billion increased 5% sequentially due to higher land and offshore drilling, both in North America and internationally. Margins of 15.4% were essentially flat sequentially as the favorable combination of increased activity and pricing gains was offset by seasonal effects. Finally, production systems revenue of $1.8 billion was up 5% sequentially, largely from new offshore projects and year-end sales. However, margins decreased 85 basis points to 9%, largely as a result of the impact of delayed deliveries due to global supply and logistic constraints. We delivered $1.9 billion of cash flow from operations and free cash flow of $1.3 billion during the quarter. Cash flows were further enhanced by the sale of a portion of our shares in Liberty, generating net proceeds of $109 million during the quarter. Following this transaction, we hold a 31% interest in Liberty. On a full year basis, we generated $4.7 billion of cash flow from operations and $3 billion of free cash flow. We generated more free cash in 2021 than in 2019, despite our revenue being 30% lower. As a result of all of this, we ended the year with net debt of $11.1 billion. This represents an improvement of $2.8 billion compared to the end of 2020. During the year, we also continued to reduce gross debt by repaying $1 billion dollars of notes that were coming due in May of this year. In total, our gross debt reduced by $2.7 billion in the last twelve months thereby significantly increasing our financial flexibility. We expect total capital investments, consisting of capex and investments in APS and exploration data, to be approximately $1.9 to $2 billion dollars, as compared to just under $1.7 billion in 2021. As a reminder, during the last growth cycle of 2009 to 2014 our total capital investment as a percentage of revenue was approximately 12%.

In essence, 2022 will be a period of stronger short-cycle activity resurgence driven by improved visibility in the demand recovery and greater confidence in the oil price environment. And as oil demand exceeds prepandemic levels in 2023 and beyond, long cycle development will augment capital spending growth in response to the current supply. In this scenario, increased activity and pricing will drive simultaneous double-digit growth both internationally and in North America that will lead our overall 2022 revenue growth to reach mid-teens. Fourth quarter earnings per share excluding charges and credits was $0.41. Overall, our fourth quarter revenue of $6.2 billion increased 6% sequentially. All divisions posted sequential growth, led by digital and integration. From a geographical perspective, International revenue grew 5%, while North America grew 13%. Pretax operating margins improved 31 basis points sequentially to 15.8% and have increased for six quarters in a row. Reservoir performance growth further accelerated in the fourth quarter with revenue increasing 8% sequentially to $1.3 billion. We expect total capital investments, consisting of capex and investments in APS and exploration data, to be approximately $1.9 to $2 billion dollars, as compared to just under $1.7 billion in 2021.

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Today we reported adjusted earnings per share of $6.89 for the second quarter of 2021, in line with our previous expectations. Well, we are maintaining our full year 2021 adjusted earnings per share guidance of approximately $21.25 to $21.75 at the midpoint, representing full year adjusted earnings per share growth of 16% above the 2020 baseline of $18.50 in excess of our long-term growth target, while acknowledging the continued uncertainty driven by COVID-19 hospitalization trends and the rate at which non-COVID cost normalized. As Susan will describe in more detail, our full year adjusted earnings per share guidance now assumes a $600 million COVID-19-related headwinds that is expected to be largely offset by favorable operating items. In addition, this guidance assumes no COVID costs will run -- non-COVID costs will run approximately 2.5% below baseline in the back half of the year, including an assumption of minimum COVID testing and treatment costs for the remaining of the year. The healthcare system has been open for several months, and we have seen vaccination rates in the seniors reach approximately 80% nationally. Finally, as announced last quarter, we've entered into an agreement to acquire the remaining 60% interest in Kindred at Home, and we expect the transaction to close mid-August, which we've included in our revised estimates for the year. We are currently seeing 87% of our provider partners and value-based arrangements and surplus. On the public policy front, as policymakers explore changes to Medicare, including adding dental, vision and hearing as part of the Medicare benefit, we stand ready to both innovate for the more than 12 million of our members who already have these benefits, including 7 million dental and vision policies in our MA group as well as offer ideas of public private collaboration to leverage our deep capabilities in Medicare and specialty markets so that beneficiaries could quickly see benefits go from a proposed law to a tangible benefit. Before turning the call over to our new Chief Financial Officer, Susan Diamond, I'd like to take a moment to speak about Susan's experience at Humana over the last 15 years. Today we reported adjusted earnings per share of $6.89 for the second quarter, in line with our previous expectations. Our Medicare Advantage growth remains on track and consistent with our previous expectations with individual MA growing solidly above the market at an expected 11.4% at the midpoint. The home business, CenterWell Senior Primary Care and Conviva are performing slightly ahead of expectations, and we remain on track to open 20 new clinics this year with Welsh Carson. I would remind you, our adjusted earnings per share guidance represents growth at or above the top end of our long-term target of 11% to 15%. And accordingly, today we are maintaining our full year adjusted earnings per share guidance of $21.25 to $21.75, while acknowledging the continued uncertainty as it respects to COVID hospitalization trends as well as the pace at which non-COVID costs bounce back and at what level they ultimately normalize. As Bruce indicated, given our experience to date, together with our current estimates for the back half of 2021, we have effectively recognized a $600 million COVID-related headwind for Medicare Advantage in our full year guide, offset by favorable operating items. Our April guide recognized we had $300 million of additional pressure from MRA relative to our initial expectations for the full year, which was offset by the net benefit of the extension of sequester relief. At the beginning of the year, we indicated that we expected non-COVID costs for our Medicare business to run 3.6% to 5.5% below baseline. In the first and second quarters, non-COVID costs run approximately 7% and 3% below baseline respectively with the bounce back outpacing expectations in the second quarter. As the healthcare system has been open for several months and a high rate of the senior population has been vaccinated, our current guidance now assumes that non-COVID costs level off and run approximately 2.5% below baseline levels in the back half of the year. I also want to reiterate that the $21.50 midpoint of our original guide continues to be the right jumping off point for 2022 adjusted earnings per share growth. During the first half of 2021, provider interactions and documentation of clinical diagnoses that will impact 2022 revenue outpace those experienced in the first half of 2020 and are approximately 80% complete in line with the estimated completion rate for the same time period in 2019.

Well, we are maintaining our full year 2021 adjusted earnings per share guidance of approximately $21.25 to $21.75 at the midpoint, representing full year adjusted earnings per share growth of 16% above the 2020 baseline of $18.50 in excess of our long-term growth target, while acknowledging the continued uncertainty driven by COVID-19 hospitalization trends and the rate at which non-COVID cost normalized. As Susan will describe in more detail, our full year adjusted earnings per share guidance now assumes a $600 million COVID-19-related headwinds that is expected to be largely offset by favorable operating items. Today we reported adjusted earnings per share of $6.89 for the second quarter, in line with our previous expectations. And accordingly, today we are maintaining our full year adjusted earnings per share guidance of $21.25 to $21.75, while acknowledging the continued uncertainty as it respects to COVID hospitalization trends as well as the pace at which non-COVID costs bounce back and at what level they ultimately normalize. As Bruce indicated, given our experience to date, together with our current estimates for the back half of 2021, we have effectively recognized a $600 million COVID-related headwind for Medicare Advantage in our full year guide, offset by favorable operating items.

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We know there are still challenges out there, especially with independents, yet Brinker continues its strong recovery, posting a better-than-expected first quarter and also delivering earnings of $0.28 a share. Both brands increased their progression from last quarter with Chili's reporting comp sales of negative 7.2% and Maggiano's negative 38.6%. And both brands delivered solid sequential improvement throughout the quarter, with Chili's ending September down just 1.4% and Maggiano's down 32.5%. This brand continued its nearly three-year streak of outperforming other casual dining chains in KNAPP-TRACK, driving a 16-point gap in sales and 23 points in traffic this quarter. Current credit card data shows a whole category down 30%, which reflects our ongoing impact of this pandemic and the reality of what is likely to be a meaningful shift in the competitive landscape. For the quarter, they improved restaurant operating margin 60 basis points year over year. When we rolled out It's Just Wings overnight to more than 1,000 restaurants. We're excited with how the brand is already performing, and we're well on track to meet our first year target of more than $150 million in sales. We continued our recovery by delivering adjusted diluted earnings per share of positive $0.28, marking the return to profitability after just a one quarter hiatus. Now for the quarter, Brinker's total revenues were $740 million and consolidated reported net comp sales were negative 10.9%. Importantly, comp sales materially improved as the quarter progressed, with September consolidated comp sales down only 5.2%. Chili's has continued to lead the casual dining sector, ranking as the #1 brand in the KNAPP-TRACK index each month in this quarter. In September, Chili's achieved another important milestone in its recovery, posting positive traffic for the brand of 2.2%. These restaurants represent approximately 86% of the Chili's system, and they were only negative 1.3% for the quarter and positive 3.6% for September. Restaurant operating margin for the first quarter was 11.6%, a noteworthy 60 basis points improvement versus prior year. Food and beverage expenses were favorable 10 basis points versus prior year due to the favorable menu mix, offset by low level of commodity inflation. Labor was also favorable 120 basis points versus prior year. The labor favorability was partially offset by the increase in restaurant expenses, which was up 70 basis points for the first quarter versus prior year. With the business improving, we generated operating cash flow of $83 million. After capital expenditures of the approximately $14 million, our free cash flow for the quarter totaled more than $69 million. We have increased our capex budget for the year and now expect to spend approximately $100 million during this fiscal year. As such, our second cash priority is to pay down debt, and we executed against this strategy during the quarter, reducing our long-term debt by approximately $50 million. We will continue to lower leverage as we move forward from here targeting an adjusted debt level of about 3.5 times EBITDAR. Adjusted earnings per diluted share are estimated to be in the range of $0.40 to $0.60 and weighted average diluted shares are estimated to be in the 45 million to 46 million share range.

We know there are still challenges out there, especially with independents, yet Brinker continues its strong recovery, posting a better-than-expected first quarter and also delivering earnings of $0.28 a share. Both brands increased their progression from last quarter with Chili's reporting comp sales of negative 7.2% and Maggiano's negative 38.6%. We continued our recovery by delivering adjusted diluted earnings per share of positive $0.28, marking the return to profitability after just a one quarter hiatus. Adjusted earnings per diluted share are estimated to be in the range of $0.40 to $0.60 and weighted average diluted shares are estimated to be in the 45 million to 46 million share range.

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The actions which are ongoing include approximately a 35% reduction in global headcount; temporarily idling assets; cutting discretionary expenditures; prioritizing the most critical projects, including capital expenditures; and rightsizing working capital to generate strong cash flow. Fourth quarter sales of almost $296 million were in line with our forecast. Adjusted fourth quarter diluted earnings per share was a negative $0.18 compared to a positive $0.86 last year. Our focus on cash management has been unwavering throughout this pandemic, and in the fourth quarter we generated another $104 million, resulting in $214 million of free cash flow for the year. Fourth quarter aerospace sales were down 66% compared to Q4 2019. Build rate reductions driven by the pandemic combined with the 737 MAX grounding and significant supply chain inventory destocking led to the reduced sales levels. Sales to other commercial aerospace, which includes regional and business aircraft, fell almost 60% year over year. On a positive note, space and defense sales increased almost 4% compared to Q4 2019. Industrial sales declined approximately 29% when compared to Q4 2019. As you know, wind energy sales are our largest industrial submarket, and those sales declined 42% in constant currency. 2020 sales were $1.5 billion, down 36% year over year. Adjusted diluted earnings per share for the year was $0.25. Free cash flow came in strong at $214 million compared to $287 million in 2019. 2020 commercial aerospace sales were about $822 million compared to $1.6 billion in 2019, a decline of almost 50% [Indecipherable] an unprecedented decline in demand driven by lower build rates across all programs, including the 737 MAX, was compounded by inventory destocking across the supply chain. Space and defense sales for 2020 grew nominally to $448 million compared to $445 million in 2019. Finally, turning to industrial, sales were $232 million in 2020, which was 26.5% lower year over year. Our relationship with Safran spans more than 35 years, and we are proud to partner with this key customer providing our high-performance materials that support the strength, efficiency, and reliability in their products. We have increased our liquidity by $239 million at December 31st, 2020, compared to the end of the first quarter of 2020. Accordingly, a weak dollar, as we are currently facing, is a headwind to our financial results. Quarterly sales totaled $295.8 million. Turning to our three markets, commercial aerospace represented approximately 43% of total fourth quarter sales. Commercial aerospace sales of $126.7 million decreased 67% compared to the fourth quarter of 2019 as destocking continued to impact our sales. Space and defense represented 40% of the fourth quarter sales and totaled $119.7 million, an increase of 2.5%, compared to the same period in 2019. Industrial comprised 17% of fourth quarter 2020 sales. Industrial sales totaled $49.4 million, decreasing 31% compared to the fourth quarter of 2019 on weaker wind and recreation markets, partially offset by strengthening automotive. On a consolidated basis, gross margin for the fourth quarter was 10.3% compared to 26% in the fourth quarter of 2019. Fourth quarter selling, general, and administrative expenses decreased 29.2% in constant currency or $9.9 million year over year as a result of headcount reductions and continued tight controls on discretionary spending. Research and technology expenses decreased 21.4% in constant currency. We continue to target eliminating $150 million of annualized overhead costs, including indirect labor. Adjusted operating loss in the fourth quarter totaled $6.1 million, reflecting the lower sales volume and overhead headwinds combined with the negative sales mix. The year-over-year impact of exchange rates was negative by approximately 40 basis points. The composite material segment represented 76% of total sales and generated a negative 6.2% operating margin compared to 18.8% margin in the prior year period. The engineered products segment, which is comprised of all structures and engineered core businesses, represented 24% of total sales and generated an 8.6% operating margin, compared to 16.9% in the fourth quarter of 2019. The tax benefit for the fourth quarter and year-to-date periods of 2020 was $12 million and $61 million, respectively. The 2020 tax benefit was also impacted by discrete tax items of $55 million, primarily composed of a valuation allowance released in the third quarter of 2020. Net cash provided by operating activities was $107.1 million for the fourth quarter and $264.3 million for 2020. Working capital was a source of cash of $87.7 million in the last quarter of the year. Capital expenditures on an accrual basis was $3.2 million in the fourth quarter of 2020, compared to $30 million for the prior year period in 2019. Accrual basis capital expenditures were $42.5 million for the full 2020 year. Free cash flow for the fourth quarter of 2020 was $104.3 million and $213.7 million for the year. We increased our liquidity by $108 million as of 31st -- December 31st, 2020, compared to September 30th, 2020, further strengthening our balance sheet. Our total liquidity at the end of the fourth quarter of 2020 was $875 million consisting of $103 million of cash and an undrawn revolver balance of $772 million. Our leverage as of December 31st, 2020, is measured on a net debt basis and was 3.6 times compared to 3.25 times at September 30, 2020, which at that time was measured on a gross debt basis. The increase in the leverage ratio was due to the lower 12-month trailing EBITDA as net debt actually decreased $108 million at December 31, 2020, compared to September 30, 2020. Total sales decreased 36%, adjusted operating income was $72 million, and adjusted diluted earnings per share was $0.25. We delivered $214 million of free cash flow during the year, which we used to deleverage. The tax assumption is more complicated than normal, but we expect the rate to be approximately 24% to 25% in 2021.

Adjusted fourth quarter diluted earnings per share was a negative $0.18 compared to a positive $0.86 last year. Accordingly, a weak dollar, as we are currently facing, is a headwind to our financial results. Quarterly sales totaled $295.8 million.

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Total revenue increased 18%, Global client revenue increased 12% and Global client BPO revenue increased 14%. We also delivered adjusted operating income margin of 15.9%, up 10 basis points; and adjusted earnings per share of $2.05, up 14%. During 2019, we drove Global client growth across our chosen verticals led by growth of more than 30% in transformation services. Highlighting the impact of transformation services on our business, our fastest-growing relationships are greater than 20% of revenues coming from transformation services. During 2019, for the second consecutive year, we signed total new bookings close to $4 billion, fed by our high-quality pipeline that remains near historic highs with steady win rates. As a comparison, during 2016 and 2017, new bookings averaged approximately $2.7 billion. Large deals continued to be a meaningful contributor to total bookings, and almost three quarters of our bookings had transformation services embedded in them, up from 60% range in 2018. I am excited to report that we now have three global relationships that crossed $100 million in annual revenue, up from just one at the end of 2018. At the end of last year, more than 40% of our total revenue is from newer constructs, not just based on FTE pricing, up from the mid-30% range only a couple of years back. The launch of our Genome platform early last year provides the right tools and methods to up-skill our 95,000-plus global team members with relevant digital transformation and other professional skills at scale. We are well on our way to achieving our first-year goal of reaching 70% penetration with the amount of learning hours continuing to expand. Total revenue was $3.52 billion, up 17% year over year or 18% on a constant-currency basis. Total BPO revenue, which represents approximately 84% of total revenue, increased 19% year over year, and total IT services revenue was up 10% year over year. Global client revenue, which represented approximately 86% of total revenue, increased 11% year over year or 12% on a constant-currency basis, at the high end of our expected range. Within Global clients, BPO revenue increased 13% year over year or 14% on a constant-currency basis, led by growth in transformation services, up more than 30%, while IT services revenue increased 3%. During 2019, we increased the number of our Global clients with annual revenues over $15 million to 49 from 45. This included clients with more than $25 million in annual revenue, growing to 25 from 21. GE revenue increased 78% year over year, above our expectations largely due to incremental scope added during the year related to the large deal we signed late in 2018. Adjusted income from operations grew 18% year over year to $559 million. Recall that we had assumed approximately $22 million at the beginning of the year related to the India export subsidy in our adjusted operating income outlook. As it became clearer throughout the year that we would only receive approximately $4 million of that expected benefit, we put plans in motion to cover the $18 million shortfall with other items. During the fourth quarter, we were able to finalize the plans to monetize a property we owned in India which generated a gain of approximately $31 million included in other operating income. This gain was partially offset during the quarter by certain other costs, including an $11 million nonrecurring impairment charge in cost of revenues related to a European wealth management platform that we no longer plan to leverage beyond the current scope. Adjusted operating margin of 15.9% was 10 basis points or $4 million, lower than our 16% target primarily due to a $4 million impairment charge recorded in the fourth quarter related to certain retirement plan assets in India. Gross margin was lower year over year primarily due to higher stock-based compensation of 20 basis points and approximately 50 basis points due to the nonrecurring charges I just mentioned. SG&A expenses totaled $795 million, compared to $694 million last year. As a percentage of revenue, SG&A expenses were down 50 basis points year over year, driven by operating leverage, despite a 50-basis point dilution related to higher year-over-year stock-based compensation, as well as a 10-basis point impact from Rightpoint acquisition-related expenses. Adjusted earnings per share of $2.05 was up 14% year over year, compared to $1.80 in 2018. This $0.25 increase was primarily driven by higher operating income of $0.34, partially offset by lower foreign exchange remeasurement gains, higher tax expense, and higher net interest expense of $0.03 each. 2019 represents the fifth consecutive year of double-digit adjusted earnings per share growth that produced a 15% compound annual growth rate over that period. Our effective tax rate was 23.7%, compared to 22.3% last year, driven by the expiration of Special Economic Zones benefits in India, changes to the jurisdictional mix of income and the impact of India tax law changes. Global client revenue increased 7% year over year or 8% on a constant-currency basis, largely driven by continued growth in our consumer goods retail, banking capital markets and high-tech verticals. GE revenues were up 61% year over year, driven by the large deals signed late last year and incremental scope of work added during the quarter. Adjusted operating margin during the quarter was 16.9%, largely in line with the level reported during the same period last year but slightly lower than we expected primarily due to the nonrecurring impairment of the India retirement plan assets in the quarter that I mentioned earlier. Gross margin for the quarter was approximately 33%, compared to 35.5% level we generated during the first three quarters of 2019. The decline was primarily driven by the two nonrecurring charges I referred to earlier that total approximately $14 million. Since 2019 was impacted by nonrecurring charges of approximately 50 basis points, we are expecting full-year gross margins to be up by 50 basis points in 2020. Total SG&A expenses were $213 million, compared to $179 million in the same quarter of last year and included approximately $7.4 million of nonrecurring Rightpoint-related acquisition expenses and approximately $16 million related to stock-based compensation. Adjusted earnings per share for the fourth quarter was $0.57 compared to $0.52 last year. The $0.05 increase was driven by higher operating income of $0.07, as well as $0.01 related to the impact of higher foreign exchange balance sheet remeasurement gains, partially offset by higher effective tax rate of $0.02 and increased share count of $0.01. Our effective tax rate was 28.1% compared to 25.8% last year due to the expiration of Special Economic Zones benefits, changes in the jurisdictional mix of our income and the impact of India tax law changes. During the year, we returned $95 million of capital to shareholders. This included approximately $65 million in the form of our regular quarterly dividend of $0.085 per share which increased by 13% in comparison to the prior year. We also repurchased approximately 766,000 shares totaling $30 million at a weighted average price of $39.16 per share during the year. Since we initiated our share buyback program in 2015, we've reduced our net outstanding shares by 17%. Over this period, we repurchased 37.4 million shares at an average price of approximately $26 per share for a total of $976 million. The weighted average annual return on these share repurchases has been approximately 18% from 2015 through the end of January this year. We currently have approximately $274 million of authorized capacity under our share repurchase program. Cash and cash equivalents totaled $467 million, compared to $368 million at the end of the fourth quarter of 2018. Our net debt-to-EBITDA ratio for the last four rolling quarters was 1.7. With undrawn debt capacity of $428 million and existing cash balances, we continue to have sufficient liquidity to pursue growth opportunities and execute on our capital allocation strategy. Days sales outstanding were 86 days, which were down from 87 days sequentially and increased three days from the last year, driven by delayed collections on certain accounts where cash was received in early January. Despite the higher DSOs, we were able to generate $428 million of cash from operations in 2019, up 26% year over year, exceeding the high end of the range we expected for the year. Capital expenditures as a percentage of revenue was 3.3% in 2019, in line with our expectations. We expect total revenues to be between $3.89 billion and $3.95 billion, representing year-over-year growth of 10.5% to 12.5% on a constant-currency basis. We expect the Rightpoint acquisition to contribute approximately 250 basis points to total company growth in 2020. This impact is approximately 100 points higher than the contribution from acquisitions to our top line in 2019. For Global clients, we expect revenue growth to be in the range of 12% to 14% on a constant-currency basis. We will continue our strategic objectives to expand our adjusted operating margin and expect to drive 10 basis points of improvement to 16%. As I mentioned earlier, we are expecting our full-year gross margins to improve by approximately 50 basis points in 2020 due to the impact of nonrecurring charges incurred in 2019. Due to the historic seasonality we see in our business, we currently expect our adjusted operating margin for the first quarter of 2020 to be in the 14% to 15% range we have seen in the last two years. Our 2020 effective tax rate is expected to be approximately 23.5% to 24.5%, up from 23.7% in 2019, driven primarily by the expiration of Special Economic Zones in India. We continue to expect our effective tax rate to stabilize in a mid-20% range as the Special Economic Zone expirations reduce over time. Given the outlook I just provided, we are estimating adjusted earnings per share for the full-year 2020 to be between $2.24 and $2.28. This increase in earnings per share of 9% to 11% includes the negative impact of higher tax rate of approximately $0.01 per share in 2020 and includes no FX remeasurement-related impact. Recall that we recorded a gain of $0.03 for FX remeasurement gains in 2019. We are forecasting cash flow from operations to grow by approximately 10%, largely in line with total company revenue growth. Capital expenditures as a percentage of revenues are expected to remain at approximately 3% to 3.5%. And finally, we just announced an increase to our quarterly dividend from $0.085 to $0.0975 per share, which equates to annualized dividend of $0.39 per share, up 15% year over year.

Total revenue increased 18%, Global client revenue increased 12% and Global client BPO revenue increased 14%. Adjusted earnings per share for the fourth quarter was $0.57 compared to $0.52 last year. This included approximately $65 million in the form of our regular quarterly dividend of $0.085 per share which increased by 13% in comparison to the prior year. We expect total revenues to be between $3.89 billion and $3.95 billion, representing year-over-year growth of 10.5% to 12.5% on a constant-currency basis. For Global clients, we expect revenue growth to be in the range of 12% to 14% on a constant-currency basis. Given the outlook I just provided, we are estimating adjusted earnings per share for the full-year 2020 to be between $2.24 and $2.28.

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While we continue to successfully implement price increases with the latest round becoming effective October 1, we have still been lagging in many cases, pressuring margins and resulting in us delivering adjusted earnings per share of $0.82 for the third quarter. In AMS, overall sales nearly doubled, including the benefit of Scapa acquisition, with underlying organic sales increasing a strong 10% in the quarter. Transportation was up approximately 25%. Though still constrained, access to more raw materials should support our ability to deliver even greater than 10% growth next year on top of what will be already rapid growth in 2021. Filtration also grew approximately 25% in the quarter as the need for cleaner and purer continues to drive positive trends. On the air filtration side, sales nearly matched third quarter of last year when our sales grew more than 60% on widespread COVID-driven HVAC system upgrades. We estimate the total impact to be in the range of $4 million to $5 million per quarter in lost sales, implying our total filtration business could have been up nearly 40% in the third quarter compared to last year. Quarterly top and bottom line results were softer than last year, though this was to be expected as last year's third quarter was the highest quarterly segment of operating profits we have achieved over the past 5 years. Unfortunately, while the decline in sales of 12% on a 10% volume decrease was generally anticipated, EP was not an exception to the inflationary pressures seen across global manufacturing. This customer alone could become a multimillion-dollar customers within 2 years. Starting with AMS, third quarter sales increased 87% with organic growth at 10%. Directionally, it is possible AMS organic sales could have been up 20% without some of the constraints that we are dealing with. We had excellent sales performance, particularly in transportation and filtration, each growing about 25% despite those limitations. Adjusted operating profit increased 9%, reflecting the high organic sales growth and the incremental profits from Scapa. Segment adjusted operating margin contracted 750 basis points to 10.5%, in large part due to higher input costs. Higher resin costs, mostly for polypropylene, had a negative effect on operating profits of approximately $5 million, net of the price increases that were effective in the period. For context on the recent price escalation, during the second quarter, polypropylene prices increased to about $1.20 per pound, up 150% year-over-year. Due to the 1 quarter lag from when we purchase, produce and sell, we felt that impact during our third quarter. In the third quarter, prices continued to rise sharply to an average price of approximately $1.40 per pound, which will flow through the P&L during the fourth quarter. Current projections call for pricing to reach under $1 by the second half of 2022. Regarding Scapa's profit contribution, the acquisition boosted AMS segment adjusted operating profits by over $9 million, similar to the second quarter. However, as noted in our release, approximately $2.5 million of Scapa's SG&A costs were booked in our unallocated costs, not within AMS. So please be cognizant of that when assessing our segment financial results. For Engineered Papers, second quarter sales were down 12% on a 10% volume decline. Pulp costs alone were approximately a $3 million negative impact compared to last year, net of the price increases effective during the quarter. For context, the NBSK wood pulp index was up 40% to nearly $1,200 per ton in the second quarter compared to last year, which flowed through the P&L in the third quarter, and the third quarter index was up 60% to nearly $1,340 per ton, which will impact fourth quarter results. Regarding adjusted unallocated expenses, we saw an increase of $4 million during the quarter. However, as noted, $2.5 million of the increase was Scapa's unallocated costs booked in our unallocated costs. On a consolidated basis, sales for the quarter increased 37% to $384 million but decreased 1% on an organic basis. Adjusted operating profit decreased 24% to $40 million. Third quarter 2021 GAAP earnings per share was $0.38 versus $0.78. The most material GAAP earnings per share items that are excluded from adjusted earnings per share were higher purchase accounting expenses of $0.29 per share compared to $0.15 last year due to the Scapa acquisition. In addition, integration expenses were $0.08 per share. Normalizing for those and other items, adjusted earnings per share was $0.82, down from last year's $1.16 per share. To put some of the supply chain and cost headwinds into perspective, we estimate that cost inflation on resins and pulp alone that we did not recoup through price increases had an impact of over $0.20 per share on earnings per share in the quarter. And the lost sales on transportation films alone was more than a $0.10 impact. With respect to the fourth quarter, we expect adjusted earnings per share to be down approximately 20% from $0.77 in the prior-year quarter, implying full year adjusted earnings per share could finish about 10% below the low end of our original guided range. This could mean potentially exiting 2022 on a run rate approaching $4 of adjusted EPS, assuming the current tax rate, which is generally consistent with our original 2021 guidance we issued before many of these challenges escalated. Regarding cash flows, year-to-date operating cash flow was approximately $28 million, down from $108 million in the prior year. Year-to-date adjusted operating profits were lower by $6 million. We incurred $14 million of cash costs related fees and expenses in connection with the Scapa acquisition. And we saw a $50 million increase in working capital outflows. This inventory factor alone accounts for approximately $30 million of higher cash outflows compared to last year. Net debt finished the second quarter just over $1.2 billion. Net debt to adjusted EBITDA for the terms of our credit agreement was 4.8x at the end of the third quarter. Despite leverage increasing, we remain comfortably below our 5.5 covenant level and have approximately $160 million in liquidity, consisting of our current cash balance of $73 million and $86 million of availability on our revolving credit facility. As we close out 2021, we want to keep the ups and downs of the past 18 months in perspective. And while we are grappling with supply chain headwinds this year, though very different issues, these 2 will ultimately normalize. We are confident we can return to a run rate of $4 in earnings per share later in 2022 with the stage set for sustained growth in the years to follow. These imperatives include innovation of new products, offering expanded solutions, realizing the synergies of our recent acquisitions and leveraging manufacturing 4.0 technology to improve operations.

While we continue to successfully implement price increases with the latest round becoming effective October 1, we have still been lagging in many cases, pressuring margins and resulting in us delivering adjusted earnings per share of $0.82 for the third quarter. On a consolidated basis, sales for the quarter increased 37% to $384 million but decreased 1% on an organic basis. Third quarter 2021 GAAP earnings per share was $0.38 versus $0.78. Normalizing for those and other items, adjusted earnings per share was $0.82, down from last year's $1.16 per share.

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Overall, our business performed well in the third quarter as we witnessed some encouraging trends, primarily in our aviation segment where commercial passenger activity continue to increase both domestically with activity climbing to more than 80% of its pre-pandemic levels and internationally where easing travel restrictions have led to increased activity in Europe and Asia. Before I walk through our third quarter results, please note that the following figures exclude the impact of non-operational items netting only $1 million this quarter, which principally related to acquisition divestiture and restructuring related adjustments in expenses. Adjusted third quarter net income and earnings per share were $23 million and $0.36 per share, respectively. Adjusted EBITDA for the third quarter was $63 million. With third quarter consolidated volume up 9% sequentially and 23% year-over-year. We generated positive cash flow from operations of $83 million during the third quarter contributing to our net cash position of $282 million. This was our 14th consecutive quarter of positive operating cash flow totaling approximately $1.4 billion over such period. Aviation segment volume was 1.7 billion gallons in the third quarter, an increase of 21% sequentially, consistent with the growth forecast provided on our second quarter call and an increase of 63% compared to the third quarter of 2020. Volume in our marine segment for the third quarter was 4.8 million metric tons, an increase of 4% sequentially and 9% year-over-year. Our land segment volume was 1.3 billion gallons or gallon equivalents during the third quarter. That's practically flat sequentially, but an increase of 4% year-over-year. Consolidated volume for the third quarter was 4.2 billion gallons or gallon equivalents, an increase of 9% sequentially and 23% year-over-year driven by the significant rebound in aviation activity. Consolidated gross profit for the third quarter was $197 million, an increase of 7% sequentially and 3% year-over-year. Our aviation segment contributed $113 million of gross profit in the third quarter. That's up 28% sequentially and 19% year-over-year. Our team in Afghanistan did an amazing job over the past 10 years. The marine segment generated third quarter gross profit of $22 million down 4% sequentially and 31% year-over-year. Our land segment delivered gross profit of $63 million in the third quarter, a seasonal decline of 15% sequentially and a decline of 4% year-over-year when excluding MultiService from last year's results. Core operating expenses which exclude bad debt expense were $153 million in the third quarter. Looking ahead to the fourth quarter, we expect core operating expenses excluding bad debt expense to be in the range of $156 million to $160 million. Again, adjusted EBITDA was $63 million in the third quarter, that's up 6% sequentially but down slightly compared to last year's third quarter. Interest expense in the third quarter was $10 million, which is effectively flat year-over-year and fourth quarter interest expense should be about the same in the range of $10 million to $11 million. And our adjusted effective tax rate for the third quarter was just under 31% and we expect the fourth quarter effective tax rate to be about the same. Despite rising prices and volume, we generated $83 million of operating cash flow during the third quarter, our 14th consecutive quarter of positive operating cash flow. This further strengthen our balance sheet resulting in a net cash position of $282 million at quarter end at a total cash position of nearly $800 million. We also repurchased 750,000 shares of our common stock during the quarter, demonstrating our continued commitment to drive additional shareholder value through both buybacks and dividends. We generated strong operating cash flow in a sharply rising price environment contributing to an ending cash position of nearly $800 million setting us up well for the Flyers acquisition, but also for the additional growth opportunities ahead. The remaining $100 million we paid in two equal $50 million instalments upon the first and second anniversaries of closing. Again, we had $796 million of cash at end of September, with the remainder to be drawn under our revolving credit facility. The transaction is expected to be significantly accretive to margins, earnings per share and cash flow and is expected to close within 60 to 90 days subject to customary closing conditions, including regulatory approval. Flyers which has been very successfully operated by the Dwelle family for decades is based in Auburn, California and distributes diesel, renewable fuels, lubricants and gasoline to more than 12,000 small to medium sized commercial and industrial and retail customers spanning 20 states. Estimated volume for 2021 is $850 million gallons with forecasted 2021 revenue and gross profit of $2.4 billion and $135 million respectively. Flyers are the national fleet fueling network consisting of approximately 200 card lock sites which are operated by Flyers and an additional 200 third-party sites, which are part of their national network. Card locks are effectively unmanned fuel sites serving commercial trucking fleets providing 24 hour access 365 days per year. While their card lock operation is clearly their largest segment, Flyers also operates a small retail distribution business which will expand the World Fuel network to more than 2,000 retail locations nationwide and they also operate a wholesale diesel and lubricants business. These combined business activities represented less than 50% of total land gross profit back in 2019 before the start of the pandemic. If you fast forward to our new run rate upon closing this transaction, these core activities will represent more than 80% of land gross profit and the overall land business will represent a greater percentage of our global franchise driving greater scale synergies and operating leverage. The transaction will also expand our North American platform to more than 30,000 commercial and industrial customers, customers to whom we can support with options to purchase lower carbon renewable fuels. While this will indeed be the largest acquisition in the history of our Company, the substantial cash flow we have generated over the past three to four years combined with the cash generated from the sale of MultiService last year allows us to complete this transaction largely with cash on hand, leaving us with a strong and liquid balance sheet post-acquisition to support organic growth as well as further investments in core business activities principally on North American land and global gas power and sustainability business providing a more exciting experience for our global team of nearly 5,000 professionals and driving greater value to our shareholders.

Adjusted third quarter net income and earnings per share were $23 million and $0.36 per share, respectively. Volume in our marine segment for the third quarter was 4.8 million metric tons, an increase of 4% sequentially and 9% year-over-year.

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So as you can imagine, when you join in the organization, particularly one that has a broad national footprint of retail locations and over 20,000 people in the field, you spend quite a lot of time traveling around the country. When I think about the 330 franchises in our dealerships, not only do the brands we represent account for 99% of all new vehicles sold in the U.S., but we're also fortunate to have a superbly balanced portfolio of the best automotive brands in the world. Today, the people of AutoNation have raised over $30 million, which has been plowed into research, treatment and care. And today, as I already mentioned, we report our seventh consecutive record quarterly results with adjusted earnings per share of $5.76, which is an increase of $137, and revenue increasing by $797 million or 14% compared to the prior year. Total units for the quarter declined by 1%. And that was driven by new vehicle sales, down 20%, which was largely offset by an increase in 21% of used vehicle volume compared to the prior year. When I look at that, nearly 90% of all pre-owned vehicles retailed in the quarter were self-sourced prior acquisition strategy, which obviously includes all of the trade-ins, but now increasingly, our we buy your car program, which processes directly from customers. And as a result, used vehicle revenue increased 55% for the quarter. And in November, we opened AutoNation USA Avondale and Phoenix and recently entered the new market with our 10 AutoNation store, USA store in Charlotte. And we remain on target to open 12 additional new stores over the next 12 months. I think our focus on margin expense control significantly contributed to our performance as strong new used finance and insurance margin per unit, up significantly year over year and in the quarter, and continued our improvement in our after sales business, which delivered an 11% increase in gross profit. I know it's been discussed over, the ongoing expense control, something which, frankly, I consider structural in the business now helped contribute to an overall increase in total store profits by over 150%. Today, we reported fourth quarter total revenue of $6.6 billion, an increase of 14% year over year, driven by impressive growth in used vehicles of 55% as well as double-digit growth in both customer financial services and aftersales. This was partially offset by a 7% decline in new vehicle revenue due to the continuing supply chain disruption to new vehicles production. For the quarter, total variable gross profit increased 49% year over year, driven primarily by an increased total variable PBR of $2,026 or 50% increase, with a slight decline in total units of 1%. As Mike mentioned, 21% growth in used units year over year largely offset a 20% decline in new units over the same period. We also demonstrated strong growth in aftersales gross profit, which increased 11% year over year. Taken together, our total gross profit increased 34% compared to the fourth quarter of 2020. Fourth quarter adjusted SG&A as a percentage of gross profit was 56.7%, a 710 basis point improvement compared to the year ago period. As measured against gross profit on an adjusted basis, our metrics improved across all key categories, with overheads decreasing 370 basis points, compensation decreasing 230 basis points and advertising decreasing 110 basis points year over year. Longer term, we expect normalized SG&A to gross profit to be in the mid-60% range, well below our pre-pandemic levels that were consistently above 70%. Floor plan interest expense decreased to $5 million in the fourth quarter of 2021 due primarily to lower average floor plan balances. Combined with the lower effective tax rate and fewer shares outstanding, we reported adjusted net income of $380 million or $5.76 per share, a 130% increase year over year. During the fourth quarter, we closed on the previously announced acquisition of Priority 1 Automotive Group, adding $420 million in annual revenue. We recently opened our 10th AutoNation USA store in Chile, North Carolina and expect to open 12 more stores over the next 12 months. Longer term, we continue to target over 130 stores by the end of 2026. During the fourth quarter, we repurchased 3.1 million shares for an aggregate purchase price of $382 million. This represents a 5% in shares outstanding from the end of the third quarter. The company has approximately $776 million available for additional share repurchase at this time. As of February 15, there were approximately 62 million shares outstanding. We ended the fourth quarter with total liquidity of approximately $1.5 billion. And our covenant leverage ratio of debt-to-EBITDA of 1.5 times remains well below our historical range of two to three times. And if you look at the fourth quarter, we delivered a SAAR around that $13 million from my estimate, well below anyone would have been able to forecast. And by the way, last year, less than 2% of all the new vehicles sold by AutoNation were above MSRP. As we see it today, we have over 11 million customers in our family already, and every year, an additional three million interactions. Gianluca orchestrated a companywide $1 billion digital business building program. I think demand for vehicles continues to be strong.

And as a result, used vehicle revenue increased 55% for the quarter. Today, we reported fourth quarter total revenue of $6.6 billion, an increase of 14% year over year, driven by impressive growth in used vehicles of 55% as well as double-digit growth in both customer financial services and aftersales. Combined with the lower effective tax rate and fewer shares outstanding, we reported adjusted net income of $380 million or $5.76 per share, a 130% increase year over year. I think demand for vehicles continues to be strong.

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Sales in the third quarter were $122 million, up 8% compared to the same period in 2020. Third quarter gross margin was 37.3%, up 490 basis points from 32.4% in the third quarter of 2020. EBITDA margin of 21.7% was up 270 basis points from 19% in the same period last year. Third quarter adjusted earnings per share of $0.46 were up 35% from $0.34 in the third quarter of 2020. Operating cash flow of $21 million was down from $26 million in the third quarter of 2020. New business awards of $179 million were solid and up from $127 million in the same period last year. In the third quarter, our sales increased 8% to $122.4 million versus the prior period. Excluding sales from the acquisition of Sensor Scientific, sales were up 6% organically. Gross margin for the third quarter was 37.3%, up 490 basis points from the 32.4% in the prior year. EBITDA margin of 31.7% was up 270 basis points from 19% in the third quarter of 2020. Third quarter adjusted earnings per share of $0.46 were up 35% from $0.34 in the same period last year. New business awards of $179 million were solid and up from $127 million in the same period last year. We made tremendous progress on this front with the non-transportation related revenue moving closer to 50% of total revenue during the third quarter of 2021. As a reminder, historically, our non-transportation related revenue was roughly 1/3 of sales, and our movement toward 50% of revenues is a meaningful shift that advanced our business across the board. As I mentioned earlier, non-transportation sales now account for nearly 50% of our revenue, supported by our efforts to diversify the business. We had various smaller wins for RF and 10 applications and continue to develop frequency solutions to support millimeter wave technology for 5G applications. In the third quarter of 2021, we delivered operating cash flow of $21 million. This past quarter, we repurchased approximately 148,000 shares for slightly less than $5 million as part of our previously announced stock buyback program. Our sweet spot continues to be acquisition targets in the range of up to $50 million a year in sales, but we remain open for the right larger opportunities that will advance our long-term strategy. Looking ahead, the semiconductor shortage is now expected to reduce vehicle builds by nine million to 10 million units this year. For the U.S. light vehicle transportation market, the SAAR dropped closer to $12 million in September, and we expect approximately 13 to 13.5 million unit range for this year. On hand days supply are now closer to 20 days, the lowest in recent history and down over 60% from the five-year average of 55 days. European production is forecasted in the 16 million to 17 million unit range. China volumes are expected to be in the 23 million to 24 million unit range for this year. Our previous guidance was for sales in the range of $480 million to $500 million and adjusted earnings per share in the range of $1.70 to $1.90. We are now updating our guidance for sales to be in the range of $495 million to $505 million, and adjusted earnings are expected to be in the range of $1.85 to $1.95. This is our 125 anniversary, and we're very proud of our rich heritage and excited by what we can give back to our communities in the years ahead as we integrate the CTS Cares program into our culture. Third quarter sales were $122.4 million, up 8% compared to the third quarter of 2020 and down 6% sequentially from the second quarter. Sales to transportation customers declined by 5% compared to the third quarter of 2020 and 13% sequentially. Conversely, sales to our other end markets increased 24% year-over-year and 3% sequentially, as the industrial, aerospace and defense end markets exhibited consecutive year-over-year double-digit growth. As Kieran mentioned, this quarter, we have made significant advances in our diversification strategy as the sales to transportation end market represented 51% of our total revenue. Changes in foreign exchange rate impacted our revenues favorably by approximately $1.3 million. Our gross margin was 37.3% in the third quarter, up 490 basis points compared to the third quarter of 2020 and up 50 basis points sequentially from the second quarter of 2021. In the third quarter, we achieved $0.03 in earnings per share in savings from our restructuring program. We remain on track to achieve targeted annualized savings of $0.22 to $0.26 of earnings per share by the end of 2022. SG&A and R&D expenses were $26 million or 22% of sales in the third quarter of 2021 versus $23 million or 20% of sales in the third quarter of 2020. In the third quarter, we recorded a noncash charge of $106 million before tax as part of the U.S. pension plan termination process. The third quarter tax rate was 28.9% as a result of the impact of the final pension settlement charge on our income statement. We anticipate our 2021 tax rate to be in the range of 19% to 21%, excluding the impact of the pension settlement and other discrete items. For the third quarter 2021, we reported a loss of $1.97 per share. Adjusted earnings for the third quarter were $0.46 per diluted share compared to $0.34 per diluted share in the same period last year. Our operating cash flow was $21 million for the third quarter of 2021 compared to $26 million in the same period last year. Our cash position is strong with a cash balance of $129 million as of September 30, 2021, up from $92 million on December 31, 2020. Our long-term debt balance is at $50 million, a slight decrease from the $55 million on December 31, 2020. Our debt to capitalization ratio was at 9.9% at the end of the third quarter compared to 11.4% at the end of 2020.

Third quarter adjusted earnings per share of $0.46 were up 35% from $0.34 in the third quarter of 2020. In the third quarter, our sales increased 8% to $122.4 million versus the prior period. Third quarter adjusted earnings per share of $0.46 were up 35% from $0.34 in the same period last year. We are now updating our guidance for sales to be in the range of $495 million to $505 million, and adjusted earnings are expected to be in the range of $1.85 to $1.95. Third quarter sales were $122.4 million, up 8% compared to the third quarter of 2020 and down 6% sequentially from the second quarter. For the third quarter 2021, we reported a loss of $1.97 per share. Adjusted earnings for the third quarter were $0.46 per diluted share compared to $0.34 per diluted share in the same period last year.

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We earned $0.90 per share despite some revenue headwinds arising from pandemic-related delays in some areas and projects. Our sequential backlog increased by $180 million this quarter on a same-store basis, and our year-over-year same-store backlog also increased by $200 million. Revenue for the 2021 second quarter was $714 million, a decrease of $30 million compared to last year and our same-store revenue declined by $46 million. Gross profit this quarter was $126 million, lower by $19 million. And gross profit as a percentage of revenue declined to 17.7% this quarter compared to 19.6% for the second quarter of 2020. If you compare the six months period this year to the same period in 2020, gross profit was 18.1% for the first six months of 2021, which is roughly equivalent to 18.2% for the first half of 2020. SG&A expense for the quarter was $88 million, or 12.3% of revenue compared to $85 million, or 11.4% of revenue for the same quarter in 2020. On a same-store basis, SG&A was similar to last year with a same-store increase of $1 million. Our 2021 tax rate was 23.8% compared to 27.6% in 2020. Net income for the second quarter of 2021 was $33 million, or $0.90 per share. And that resulted -- that result included $0.10 of income related to the revaluation of our contingent earn-out obligations. Our net income for the second quarter of 2020 was $39 million, or $1.08 per share. For our second quarter, EBITDA was $55 million and year-to-date we have $106 million of EBITDA. Free cash flow in the first six months was $101 million as compared to $151 million for the first half of 2020. Amteck will be included in our Electrical segment, and it is expected to contribute annualized revenues of approximately $175 million to $200 million and EBITDA of $14 million to $17 million. In light of the required amortization expense related to intangibles and other costs associated with that transaction, the acquisition is expected to make a neutral to slightly accretive contribution to earnings per share for the first 12 months to 18 months. Backlog at the end of the second quarter of 2021 was $1.84 billion. We believe that the business impacts relating to COVID-19 have now stabilized, and as a result same-store backlog increased sequentially by 11% or $180 million. Our industrial activities were 42% of total revenue in the first half of 2021. Institutional markets, which include education, healthcare and the government, are strong and with 33% of our revenue. But with our changing mix it is now about 25% of our revenue. For the first six months of 2021, construction was 77% of our revenue with 46% from construction projects for new buildings, and 31% from construction projects in existing buildings. Service was a great story this quarter, and service revenue was 23% of year-to-date revenue with service projects providing 9% of revenue, and pure service, including hourly work, providing 14% of revenue. Year-to-date service revenue is up approximately 12% with improved profitability. Our Electrical gross margins improved from 6.5% in the first six months of 2020 to 14.3% this year.

We earned $0.90 per share despite some revenue headwinds arising from pandemic-related delays in some areas and projects. Net income for the second quarter of 2021 was $33 million, or $0.90 per share.

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As I mentioned in yesterday's release, I remain confident that our solid foundation and the strategic initiatives we have undertaken in the past 16 months will reward our customers, shareholders and employees in the quarters and years to come. Consequently, we recorded a noncash pre-tax goodwill impairment charge of $161.1 million, which drove a net loss in the third quarter of approximately $150 million, or $2.78 per share. Importantly, we reported non-GAAP operating income of $2.6 million in the third quarter, or $0.05 per share. Consolidated net investment income decreased quarter-over-quarter to $16.9 million. However, we reported $4.9 million in income from our unconsolidated subsidiaries. For the third quarter, our consolidated current accident year net loss ratio was 80.7%, a decrease of 1.6 percentage points quarter-over-quarter as the early results of our strategic underwriting efforts of the past year are beginning to manifest in our specialty P&C business. Each of our segments contributed to the $11.5 million of net favorable development we recognized in the third quarter. Our consolidated underwriting expense ratio was 30.5% in the quarter, an increase of 1.8 percentage points from the year-ago period. The increase is attributable in part to lower earned premiums, but what is most important to know is that expenses in the current quarter included $3.2 million in onetime charges associated with the restructuring that resulted in 78 position elimination through a combination of early retirement, job eliminations, reassignments and promotions that spanned our entire organization. This restructuring is expected to result in annual savings of approximately $7.4 million in addition to other expense saving initiatives earlier this year. This leads us to a consolidated combined ratio of 105.3% for the third quarter. In summary, we continue to see incremental improvements in our operating results as the strategic initiatives of the past 16 months gained traction. The specialty P&C segment recorded a third quarter loss of $12.5 million. Gross premiums written were $158.3 million, a decrease of 4.1% percent quarter-over-quarter, reflecting our reunderwriting efforts in healthcare professional liability and timing differences in the regular renewal cycle of 24-month policies. Notably, within our specialty book, we have reduced gross premiums written in our Senior care line by almost 82% quarter-over-quarter. Further, the timing differences related to the 24-month policies in our standard physician line contributed $3.9 million to the reduction. In relation to these strategic underwriting efforts, premium retention in the segment was 81% for the quarter, driven largely by a 55% retention in our specialty lines primarily related to the Senior care line of business and includes a nonrenewal of a $5.6 million policy in that line during the quarter. In our Standard Physician line, retention was 85%, lower by two percentage points quarter-over-quarter, reflecting our state-specific pricing adjustments in challenging venues and competitive market conditions. However, we continue to deliver strong premium retention results in our medical technology liability business and small business units, which were 85% and 92%, respectively. The segment's lower premium retention was largely offset by renewal premium increases of 14% in specialty and 10% in Standard Physician. New business writings in the segment were $8.7 million in the quarter compared to $9 million a year ago. New business writings in our medical technology liability business increased to $2 million compared to $1.3 million in the third quarter last year as demand for pandemic-related products in the medical technology space continues to rise. The current accident year net loss ratio was 89.8% in the quarter, a 4.7 percentage point improvement from the year-ago period, attributable to underwriting efforts and price strengthening. Furthermore, the current accident year net loss ratio for the first nine months of 2020, excluding the large national healthcare account tail policy and the $10 million COVID reserve, is approximately 6.5 percentage points lower than the full-year ratio for 2019. Despite the current loss environment, we recognized net favorable prior-year development of $2.9 million, of which $2.5 million is attributable to our medical technology liability line. The specialty P&C segment reported an expense ratio of 23.8% in the quarter, essentially flat from the same quarter last year. The expense ratio reflects improvements in our expense model made during the past year, offset by related onetime restructuring expenses of $1.8 million and lower net earned premium. This restructuring is expected to result in annual savings of $3.6 million in addition to other expense savings measures we've disclosed previously. As a result of our prior organizational structure enhancements, restructuring field offices and staff reductions, we anticipate quarterly run rate expense savings of $3 million in the segment, or $12 million annually. However, once we receive preliminary regulatory approval of NORCAL's proposed plan of conversion, there will be a 60- to 90-day solicitation period before the deal can close, and we anticipate the deal will close in the first quarter of 2021. Upon completion of the transaction, approximately 75% of our healthcare professional liability business will be written in the Standard Physician's line, a marketplace in which we have deep expertise and a successful history of profitability. The workers' compensation insurance segment produced income of $1.5 million and a combined ratio of 97.4% for the third quarter of 2020. During the quarter, the segment booked $63 million of gross premiums written, a decrease of 10% quarter-over-quarter. Renewal price decreases were 3% for the quarter, representative of the continued competitive pressures in our underwriting territories despite COVID-19 and the associated economic conditions. Premium renewal retention was 86% for the 2020 quarter compared to 84% in 2019 as we continued to see stronger premium retention each month during the pandemic. New business writings decreased quarter-over-quarter to $7.4 million in 2020 compared to $11.3 million in 2019. Audit premium for the third quarter of 2020 resulted in return premium to policyholders of $1.6 million compared to additional premium to the company of $1.8 million for 2019, a quarter-over-quarter decrease attributable to the economic impact of COVID-19 on policyholder payrolls. The calendar year net loss ratio decreased 3.2 percentage points to 62.2% in the third quarter due to a decrease in the current accident year loss ratio and higher prior-year net favorable reserve development of $2 million in 2020 compared to $1.4 million in 2019. The reduction in the 2020 accident year loss ratio from 70.4% at June 30, 2020 to 69.2% at September 30, 2020 was driven by our recognition of favorable claim trends in the 2020 accident year, which I'll describe in more detail momentarily. As this reduction was fully recognized in the current quarter, the result is a third quarter current accident year loss ratio of 66.9%. The 2020 accident year loss ratio of 69.2% at September compares to 68.2% for the same period in 2019 and reflects the impact of renewal rate decreases and negative audit premium, partially offset by the favorable claim trends in 2020. We've seen a 36.5% decrease in reported claim frequency during the pandemic with only $1.3 million of gross undeveloped incurred losses from the currently reported 447 COVID claims. Our claims professionals remain highly effective while working remotely, closing 47% of 2019 and prior claims during 2020, consistent with historical claim closing rates. The underwriting expense ratio in the quarter was 35.2% compared to 30.1% in 2019, reflecting the decrease in net premiums earned and a onetime severance charge of $923,000 related to our restructuring, which I will describe in more detail shortly. Underwriting and operating expenses were $15 million for the third quarter of 2020, essentially flat from 2019 despite the included severance charge. Turning to the Segregated Portfolio Cell Reinsurance segment, income was approximately $1.2 million for the quarter, which represents our share of the net underwriting profit and investment results of the captive programs in which we participate. The restructuring implementation commenced September one and is expected to result in an annual savings of approximately $3 million in addition to other expense management measures. First, our results in the quarter were income of $3.7 million, one of the best quarters we've had since we invested in the syndicates. Our combined ratio improved 10.5 percentage points to 89.6%, as both net losses and underwriting expenses were reduced by over 20%. In addition, as a result of our reduced participation, in the third quarter we received a return of approximately $32 million from our funds at Lloyd's. Lastly, Syndicate 6131 entered into a quota share reinsurance arrangement with an unaffiliated insurer, effectively reducing our net participation in the syndicate by half. Before we open the call to questions, I want to reiterate that the changes we've implemented in the quarter and over the past 16 months have been important. As a result of our strategic initiatives in 2020, we anticipate $17 million in annual expense savings. This is on top of initiatives taken in 2019 that reduced annual costs by $5 million. This brings us to estimated cumulative annual cost reductions of approximately $22 million since this leadership team was put in place over 16 months ago, which includes an overall reduction in our workforce of approximately 13%. Thus far in 2020, we've recognized a little over $5 million in onetime charges primarily related to early retirements and job eliminations.

Consequently, we recorded a noncash pre-tax goodwill impairment charge of $161.1 million, which drove a net loss in the third quarter of approximately $150 million, or $2.78 per share. Importantly, we reported non-GAAP operating income of $2.6 million in the third quarter, or $0.05 per share.

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For example, Oregon's unemployment rate was 8% in September essentially matching the national rate. That's down from a 14.9% high in April. In the Portland metro region, year-to-date closed home sales were up 3.1% from 2019 with stronger year-over-year price growth of about 10%. As a result, we have connected over 13,800 meters during the last 12 months ended September 30th and that's 300 more meters than we added at this time last year. Our overall customer growth rate is 1.9% for the 12 months ended September and reflects a lower level of customer disconnecting from our system during the pandemic. The order includes the $45.1 million increase in our revenues requirement based on a 50/50 cap structure, a return of equity of 9.4% and a cost of capital is just under 7%. In addition, the order reflects an average rate base of $1.44 billion or an increase of $242 million compared to the last rate case. In Oregon, the combined effect of the rate case and annual purchase gas adjustment resulted in a $2 increase to a residential customers monthly bill. Overall gas bills continue to remain low, Northwest Natural customers are paying about 30% or excuse me 40% less today for their bills than they did 15 years ago. In addition, in June we passed back a record of $17 million in storage bill credits to Oregon gas customers. Our annual dividend amount is now $1.92 per share. Through September 30th, we have incurred an estimated $7 million of incremental cost and lower revenue. In the third quarter, we recognized a $3.1 million regulatory asset for Oregon costs incurred to date. At the end of September, this revenue totaled approximately $1 million. In summary of the $7 million of total financial impact as of September 30th, we expect to recover $4.4 million through rates under these orders with $3.1 million deferred in the third quarter. In addition to these deferrals in order to further mitigate the financial effects of the pandemic, we initiated temporary cost-savings measures which provided approximately $2 million of savings for the third quarter and year-to-date. I'll describe earnings drivers on an after-tax basis using the statutory tax rate of 26.5%. The return of excess deferred income taxes to our Oregon customers resulted in an effective tax rate of 22.3%. Also note that year-to-date earnings per share comparisons were impacted by the issuance of 1.4 million shares in June 2019 as we raised equity to fund investment in our gas utility. For the quarter, we reported a net loss from continuing operations of $18.7 million or $0.61 per share compared to a net loss of $18.5 million or $0.61 per share for the same period in 2019. The gas utility posted a decline of $0.08 per share related to higher depreciation and general tax expense, partially offset by the recognition of the regulatory deferral asset for COVID-19 which I discussed earlier. In the gas distribution segment, utility margin declined $300,000 as the benefit of customer growth and higher rates in Washington was slightly more than offset by a decrease in revenues from late charges and reconnection fees and slightly lower usage from the industrial and large customer use -- large commercial customers that are not decoupled. Utility O&M increased $700,000 in the quarter as we incurred higher compensation and non-payroll expenses, partially offset by the cost savings measures and deferral of expenses related to COVID-19. Depreciation expense and general taxes increased $2.4 million related to ongoing investment in our system. Finally, interest expense for the quarter decreased $1.2 million as we deferred interest incurred to increased cash balances in March. For the first nine months of 2020, we reported net income from continuing operations of $24.5 million or $0.80 per share compared to net income of $27 million or $0.91 per share for the same period last year. Last year's results included a regulatory disallowance of $0.22 per share related to an Oregon Commission order. Excluding that disallowance on an adjusted non-GAAP basis, earnings per share from continuing operations was $1.13 per share for 2019. The $0.33 per share decline is largely due to year-over-year growth in expenses and the effects of COVID. In the gas distribution segment, utility margin declined $100,000. Higher customer rates in Washington, customer growth, and revenues from the North Mist expansion project contributed an additional $10.4 million. This was offset by lower entitlement and curtailment fees related to pipeline constraints in 2019 and warmer weather in the first quarter of 2020 compared to the prior year, which collectively reduced margin by $4.8 million. Utility margin also declined $1.1 million due to lower revenue from late and reconnection fees as we suspended normal collection processes. The remaining $5.2 million decline in utility margin is a result of the March 2019 Oregon order related to tax reform and pension expense. Utility O&M and other expenses declined $6.4 million during the first nine months of 2020. This decrease is associated with the Oregon order, which resulted in $14 million of additional expense in the first quarter of last year as previously discussed. This was offset by a $6.4 million increase in underlying O&M related to higher compensation costs, contractor and professional service as well as moving costs for our new headquarters and operation center. As a result, depreciation expense and general taxes increased $7.3 million. Finally, utility segment tax expense in 2019 included a $5.9 million benefit related to the implementation of the March order, with no significant resulting effect on net income. Net income from our other businesses increased $900,000 from higher earnings from our water and wastewater utilities and lower expenses at our holding company, partially offset by lower asset management revenues. A few notes on cash flow, for the first nine months of 2020, the company generated $149 million in operating cash flow. We invested $227 million into the business with $193 million of primarily gas utility, capital expenditures, and $38 million for water acquisitions. We continue to expect capital expenditures this year to be in the range of $240 million to $280 million. Going into the heating season, 96% of our commercial and industrial customers are current with their bills. Today, we reaffirm guidance for continuing operations in the range of $2.25 per share to $2.45 per share and guided toward the lower end of the range, due to the potential implications from COVID-19. At the same time, we're also advancing key long-term objectives, that includes aggressively pursuing a renewable future and a carbon-neutral vision for our gas utility by 2050. In fact, the existing gas system has provided nearly twice as much energy on a peak heating day as the electric system, and yet the use of natural gas in our customers' homes and businesses accounts for just 6% of Oregon's greenhouse gas emissions annually. That's a very efficient delivery of a lot of energy, but we know we can do better, which is why we established a voluntary carbon savings goal of 30% by 2035 for emissions from our own operations and our sales customers' usage. In 2019, we achieved 21% of the savings needed to meet this goal. That's equivalent to removing over 60,000 cars from the road. Back in 2002, we were one of the first gas utilities in the country to obtain a decoupling mechanism, which supports the energy efficiency move. In 2007, Northwest Natural was the first stand-alone gas facility in the country to offer customers a voluntary program that allows them to offset some or all of their carbon emissions from natural gas use. We understand more about RNG and hydrogen today and now have and we now have policy support with the groundbreaking Senate Bill 98 in Oregon. In fact, at 20 billion cubic feet, our Mist underground storage facility is equivalent to about six million-megawatt hours of electricity storage. That's about a $2 trillion battery at today's prices and many times larger than the biggest lithium battery in the world.

For the quarter, we reported a net loss from continuing operations of $18.7 million or $0.61 per share compared to a net loss of $18.5 million or $0.61 per share for the same period in 2019. Today, we reaffirm guidance for continuing operations in the range of $2.25 per share to $2.45 per share and guided toward the lower end of the range, due to the potential implications from COVID-19.

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Driven by our highest first quarter new business production in U.S. public finance since we acquired AGM in 2009, Assured Guaranty generated $86 million of PVP, 69% above last year's first quarter PVP and more than in all but one first quarter since 2009. Key shareholder value measures also reached new highs at quarter end of $79.44 for adjusted operating shareholder's equity per share and $116.56 for adjusted book value per share, as we continued our successful capital management program. Additionally, adjusted operating income per share of $0.55 was 53% higher than in the first quarter of 2020. Par volume sold in the primary U.S. municipal bond market reached its highest first quarter level since the Great Recession, $104.5 billion, which industry insured par neared $8.5 billion, setting a 12-year record for first quarter insured volume. Strong demand for bond insurance led to a 76% more insured par sold than in the last year's first quarter, significantly outperforming the 19% increase in total municipal issuance. The insurance penetration rate of 8.1% during the first quarter of 2021 was higher than the 2020 full year rate of 7.6% and higher than every first quarter and annual penetration rate since 2009. Our 65% share of insured market municipal -- insured municipal par sold was better than our market share in any quarter since 2014. The $5.5 billion of new issue par sold with our insurance in the quarter was the highest amount we insured in any first quarter since 2010. It was almost 2.5 times our insured par in last year's first quarter and our primary market transaction count of 252 was up 57%. These year-over-year quarterly comparisons were influenced by the pandemic-related market disruption in the first quarter of 2020; but it would be -- but what may be a more meaningful comparison, our first quarter insured par sold was almost 20% higher than in the fourth quarter of 2020. During this year's first quarter, we insured $100 million or more on eight different transactions, with aggregate insured par totaling $2.25 billion. We believe those concerns combined within a appreciation of our overall value proposition were behind our ability in the first quarter to ensure $1.5 billion of par on 27 transactions we signed AA underlying ratings by at least one of the two leading rating agencies. Additionally, we made progress on important new transactions, two of which have already closed since quarter-end, generating over $23 million of international PVP in the second quarter. Importantly, and relates to our financial strength and stability, our disciplined and diversified approach to writing new business along with our loss mitigation activities has helped to reduce the below investment grade percentage of our insured portfolio to just 3.2% of net par outstanding. But with these settlements, we have agreed to terms on over 93% of our Puerto Rico net par exposure. Outside of these agreements, the Company has only $241 million of additional Puerto Rico net par exposure, almost all of which relates to credits that have not missed any principal or interest payments. Lastly, once again, we reassess the potential impact of COVID-19 on our insured portfolio, especially in light of the $1.9 trillion federal stimulus package enacted during the first quarter. The CLO market blossomed during the first quarter with total supply, including new issues, revise, resets and reissues setting quarterly records of $106.3 billion in the United States and EUR26 billion in Europe. AssuredIM issued one CLO in each of those markets during the period, we also reset a CLO which extended its life, and therefore it's fees, and we sold 71 million of CLO equity from our legacy funds. We reduced our total non-fee earning CLO AUM to $2.4 billion from the $3.6 billion three months earlier, while increasing total CLO AUM by almost $0.5 billion to $14.3 billion. Looking toward the rest of the year, we expect strong investor demand for municipal bonds, exemplified by the approximate $30 billion of inflows that municipal bond mutual funds and ETFs took in during the first quarter. We've been through a lot in the last -- past 14 months. As Dominic mentioned, first quarter U.S. public finance PVP was our strongest first quarter since 2009 and was the largest component of our $86 million first quarter PVP. Strong PVP results over the last several quarters have helped us maintain our deferred premium revenues, our storehouse or future premium earnings at approximately $3.8 billion since the end of 2019. In the Asset Management segment, total third-party inflows of $873 million was primarily driven by CLO issuance, which helped to increase our fee earning AUM by 11% in the first quarter of 2021 from $12.9 billion to $14.4 billion. In terms of adjusted operating income, we earned $43 million or $0.55 per share in the first quarter of 2021 compared with $33 million or $0.36 per share in the first quarter of 2020. While this represents a 30% increase year-over-year, I want to highlight that our first quarter 2021 results include a one-time $13 million after-tax write-off of an intangible asset attributable to the insurance licenses of MAC, or Municipal Assurance Corp. Excluding this write-off, first quarter 2021 adjusted operating income would have been $56 million, representing an increase of 70% over first quarter 2020. The Insurance segment's first quarter contribution to adjusted operating income was $79 million compared with $85 million in the first quarter of 2020. Excluding the MAC license write-off, adjusted operating income would have been $92 million or an increase of $7 million. Within the Insurance segment, total income from investment portfolio increased by $18 million or 24%. Our fixed maturity and short-term investments account for the largest portion of the portfolio, generating net investment income of $73 million in first quarter 2021 compared with $83 million in first quarter 2020. The AssuredIM Funds, primarily the CLOs and asset-based funds, generated a gain of $10 million in first quarter 2021 compared with a loss of $10 million in the first quarter of 2020. Alternative investments, managed by the third parties, generated gains of $9 million in the first quarter 2021. However, over the long term, we expect the enhanced returns on the alternative investment portfolio to be over 10%, which exceeds the returns on the fixed maturity portfolio. Scheduled net earned premiums weren't consistent -- were consistent at $107 million year-over-year as recent new business production substantially offset the decline in earnings on Structured Finance transactions. First quarter 2021 refundings resulted in accelerations of $16 [Phonetic] million compared with $50 million in the first quarter 2020. Loss expense was $30 million in first quarter 2021 compared with $18 million in first quarter 2020. Net economic loss development of $13 million in the first quarter of 2021, primarily consists of $11 million in loss development on U.S. RMBS, which was mainly attributable to lower excess spread offset by benefits due to changes in discount rates and improved performance and recoveries on previously charged off loans in certain second lien transactions. The economic loss -- the economic development attributable to change in discount rates for all transactions was a benefit of $48 million for first quarter 2021. These agreements, in addition to our previous PREPA agreement represent over 93% of our net Puerto Rico par outstanding or 46% of total below investment grade net par outstanding. Adjusted operating income was a loss of $7 million in the first quarter 2021 compared with a loss of $9 million in first quarter 2020. Adjusted operating loss for the Corporate division was $29 million in first quarter 2021 compared with $39 million in the first quarter of 2020. In first quarter 2021, the effective tax rate was $15 million -- I'm sorry, 15% compared with 24.7% in first quarter 2020. Turning to our capital management strategy, in the first quarter of 2021, we repurchased 2 million shares for $77 million at an average price of $38.83 per share. Since then, we have continued the program and repurchased an additional 600,000 shares for $28 million. Since the beginning of our repurchase program in January of 2013, we returned $3.8 billion to shareholders, resulting in 64% reduction in total shares outstanding. Accumulative effect of these repurchases was a benefit of approximately $30 in adjusted operating shareholder's equity and $53 in adjusted book value per share, which helped drive these metrics to new record highs of over $79 in adjusted operating shareholder's equity and over $116 million in adjusted book value per share. From a liquidity standpoint, the holding companies currently have cash and investments of approximately $218 [Phonetic] million, of which $60 million resides in AGL.

Additionally, adjusted operating income per share of $0.55 was 53% higher than in the first quarter of 2020. In terms of adjusted operating income, we earned $43 million or $0.55 per share in the first quarter of 2021 compared with $33 million or $0.36 per share in the first quarter of 2020.

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mdu.com, under the Investors tab. For second quarter of 2021, we delivered earnings of $100.2 million or $0.50 per share compared to second quarter 2020 earnings of $99.7 million or also $0.50 per share. During the quarter, our results were impacted by higher stock-based compensation and healthcare costs of approximately $4.2 million after tax. Further impacting our second quarter consolidated results was a $5.4 million lower investment returns on certain benefit plans compared to the same quarter in 2020. While these items had an impact on the quarter's results, all of our operations performed very well throughout the first six months of the year, growing consolidated revenues by 3.5% and increasing earnings $27.5 million year-to-date. Our utility business are $9.6 million for the second quarter compared to earnings of $11.2 million in the second quarter of 2020. For the Electric Utilities segment, reported earnings of $10.3 million for the quarter compared to $12.2 million for the same period in 2020. Partially offsetting the decrease was higher adjusted gross margin driven by a 6.9% increase in retail sales volumes. Our natural gas utility segment reported a seasonal loss of $700,000, improved from a seasonal loss of $1 million for the same period in 2020. Adjusted gross margin increased during the quarter from approved rate recovery and 2% customer growth. The pipeline business had earnings of $9.2 million in the second quarter compared to $9 million in the second quarter of 2020. Construction services reported record second quarter earnings of $28.9 million compared to the prior year's record of $27.9 million. Revenues increased 6% on a year-over-year basis to second quarter -- to a second quarter record of $525.6 million. Our construction materials business reported second quarter earnings of $51.4 million compared to the prior year's $53 million in the second quarter. Revenues increased 2% to $633.8 million. We now have approximately 1.15 million customers across our electric and natural gas utility businesses. We continue to expect strong customer growth across our service territory, outpacing the national average and in the range between 1% and 2% compounded annually. Our generation portfolio in regards to nameplate capacity prior to the commencement of the retirements -- these retirements was 48% coal and will decrease to 31% in 2023 upon completion of the proposed Heskett IV natural gas-fired peaking unit. The project involves constructing approximately 60 miles of 12-inch pipeline from our existing facilities at Mapleton, North Dakota to Wahpeton. It will add 20 million cubic feet per day of natural gas capacity and is expected to cost approximately $75 million. This $260 million project will add 250 million cubic feet of daily natural gas transportation capacity to our system, bringing WBI's total pipeline capacity to more than 2.4 Bcf per day, while helping to reduce natural gas flaring in the region and allowing Bakken producers to move natural gas to market. CSG reported record second quarter revenues and earnings and an all-time record backlog now standing at $1.32 billion as of the end of June. As a reminder, revenue guidance at this business for 2021 continues to be in the range of $2.1 billion to $2.3 billion, with margins comparable to or slightly higher than 2020 levels. Construction materials reported backlog at the end of the quarter at $912 million, an increase of over 4% from the prior year. Revenue guidance for this business is also in the range of $2.1 billion to $2.3 billion, with margins comparable to our 2020 levels. With combined construction backlog at an all-time record at $2.23 billion as of June 30, we believe we are well positioned to take advantage of these multiyear growth opportunities. While we believe these infrastructure proposals will provide additional opportunities to some of our core areas of business, such as surface transportation improvements, renewable energy, power grid modernization, broadband and much more, these infrastructure proposals are not included in our earnings per share guidance of $2 to $2.15 for this year of 2021 or in our 5-year capital investment plan for that matter as well. For the last 83 consecutive years, we provided a competitive dividend for our shareholders and have been increasing it for the last 30 years.

mdu.com, under the Investors tab. For second quarter of 2021, we delivered earnings of $100.2 million or $0.50 per share compared to second quarter 2020 earnings of $99.7 million or also $0.50 per share. The pipeline business had earnings of $9.2 million in the second quarter compared to $9 million in the second quarter of 2020. As a reminder, revenue guidance at this business for 2021 continues to be in the range of $2.1 billion to $2.3 billion, with margins comparable to or slightly higher than 2020 levels. Revenue guidance for this business is also in the range of $2.1 billion to $2.3 billion, with margins comparable to our 2020 levels. While we believe these infrastructure proposals will provide additional opportunities to some of our core areas of business, such as surface transportation improvements, renewable energy, power grid modernization, broadband and much more, these infrastructure proposals are not included in our earnings per share guidance of $2 to $2.15 for this year of 2021 or in our 5-year capital investment plan for that matter as well.

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The safety of our employees remains our number 1 priority. Sales in the quarter were $1.2 billion, down 8% compared to the fourth quarter of 2019. Organic sales were also down 8% with the divestiture of Reading Alloys, a three point headwind, the acquisition of IntelliPower contributing one point to growth and foreign currency added two points. As we saw in prior quarters, our commercial aerospace business was the most impacted by the pandemic with sales down approximately 35% in the quarter. Orders continued to improve with our book-to-bill at 1.07 for the fourth quarter. This led to a record backlog of $1.8 billion, providing us with a positive line of sight into 2021. Operating income in the fourth quarter was $298.1 million, up slightly from the fourth quarter of 2020, and operating margins were a record 24.9%, up an impressive 210 basis points compared to the prior year period. EBITDA in the fourth quarter was a record $360.7 million and EBITDA margins were also a record of 30.1%, up a robust 300 basis points over the fourth quarter of 2019. This operating performance led to earnings per diluted share of $1.08, matching last year's fourth quarter results and comfortably ahead of our guidance for the quarter. With operating cash flow up 13% to a record $386 million and free cash flow conversion, exceptional 158% of net income. EIG sales in the fourth quarter were $819.4 million, down 7% from the prior year and in line with our expectations of solid sequential improvement. Organic sales were down 10%, with the acquisition of IntelliPower contributing 2%, and foreign currency contributing 1%. Despite the overall sales decline, EIG's operating income in the fourth quarter increased 3% over the prior year to a record $236 million, and operating margins reached a new high of 28.8%, expanding an exceptional 270 basis points over the same period in 2019. EMG sales were $379.5 million, down 11% from the fourth quarter in 2019, driven in large part by the divestiture of Reading Alloys. Organic sales were down 4%, with the divestiture an 8-point headwind, and foreign currency adding two points. Fourth quarter operating income for EMG was $79.8 million, and operating margin expanded an impressive 110 basis points to 21%. Overall sales for the year were $4.5 billion, down 12% from 2019. Organic sales declined 13%, with acquisitions adding 4%, the divestiture of Reading Alloys a 3% headwind, and foreign currency flat for the year. Operating income in 2020 was $1.1 billion and operating margins were a record 23.6%, expanding 80 basis points over 2019. EBITDA for the year was $1.32 billion and EBITDA margins were a record 29.2%, up 230 basis points from last year. This led to full year earnings of $3.95 per diluted share, down 6% versus the prior year. As Bill will highlight, our businesses did a fantastic job managing our working capital, which helped drive a record level of cash flow with full year operating cash flow up 15% to $1.28 billion. In the fourth quarter, we generated $60 million in total cost savings with $50 million of structural savings and $10 million in temporary savings. And for the full year, total incremental savings versus the prior year were $235 million, with approximately $145 million of structural savings and $90 million in temporary savings, including furloughs, travel reductions and temporary pay actions. For the full year 2021, we expect approximately $140 million of incremental operational excellence savings. In 2020, we invested $246 million in research, development and engineering, approximately 5.5% of sales. In the fourth quarter, our vitality index or the percent of sales generated from products introduced over the last three years was an impressive 25%. In 2021, we expect to invest approximately $270 million or 5.5% of sales in research, development and engineering to enhance our position as a global technology leader. This is a 10% increase over 2020 RD&E spend. As Bill will discuss shortly, AMETEK has significant balance sheet capacity and, when combined with our robust cash flow generation, provides us with meaningful capital to support our acquisition strategy, which remains our number 1 priority for capital development -- deployment. For the year, we expect both overall and organic sales to be up mid-single digits versus 2020. Diluted earnings per share for the year are expected to be in the range of $4.18 to $4.30, up 6% to 9% compared to 2020. For the first quarter, we anticipate continued year-over-year impact from the pandemic, with overall sales down low to mid-single digits and first quarter earnings of $0.97 to $1.02 per share, flat to down 5% versus the prior year. Fourth quarter general and administrative expenses were $17.7 million, up modestly from the prior year. For the full year, G&A was down 11% from 2019 due to lower compensation costs and other discretionary cost reductions and, as a percentage of total sales, was 1.5% in both years. For 2021, general and administrative expenses are expected to be up approximately 10% due primarily to the return of temporary costs, including compensation. The effective tax rate in the fourth quarter was 20.1%, up from 17.6% in the fourth quarter of 2019. For 2021, assuming the current tax regime, we anticipate our effective tax rate to be between 19% and 20%. Operating working capital was an impressive 14% in the fourth quarter, down 330 basis points from the 17.3% reported in the same quarter last year, reflecting the outstanding work by our teams. Capital expenditures were $37 million in the fourth quarter and $74 million for the full year. Capital expenditures in 2021 are expected to be approximately $110 million. Depreciation and amortization in the quarter was $65 million and for the full year was $255 million. In 2021, we expect depreciation and amortization to be approximately $260 million, including after-tax, acquisition-related intangible amortization of approximately $117 million or $0.50 per diluted share. Operating cash flow in the quarter was a record $386 million, up 13% over last year's fourth quarter. Free cash flow was also a record at $349 million, up 16% over the same period last year, resulting in a free cash flow conversion of 158% of net income. Operating cash flow for 2020 was $1.28 billion, up 15% over the prior year, and free cash flow was $1.21 billion, a year-over-year increase of 19%. Full year free cash flow conversion was 158% of net income adjusted for the Reading Alloys gain. Total debt at December 31 was $2.41 billion, down from $2.77 billion at the end of 2019. Offsetting this debt is cash and cash equivalents of $1.2 billion. Our gross debt-to-EBITDA ratio was 1.8 times and our net debt-to-EBITDA ratio was 0.9 times at year-end. We entered 2021 with approximately $2.6 billion in liquidity to support our growth initiatives.

Sales in the quarter were $1.2 billion, down 8% compared to the fourth quarter of 2019. This operating performance led to earnings per diluted share of $1.08, matching last year's fourth quarter results and comfortably ahead of our guidance for the quarter. For the year, we expect both overall and organic sales to be up mid-single digits versus 2020. Diluted earnings per share for the year are expected to be in the range of $4.18 to $4.30, up 6% to 9% compared to 2020. For the first quarter, we anticipate continued year-over-year impact from the pandemic, with overall sales down low to mid-single digits and first quarter earnings of $0.97 to $1.02 per share, flat to down 5% versus the prior year. Offsetting this debt is cash and cash equivalents of $1.2 billion.

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We have now processed 100% of the information received from the mid-April 55-day resettlement and issued all expected invoices to our customers. The updated financial impact from winter Storm Uri, net of our mitigation efforts, is expected to be a net loss of $500 million to $700 million. In total, our platform was positive $17 million with estimated bad debt, primarily from C&I customers accounting for $109 million. First, the recently acquired Direct Energy portfolio had a heat recall option with a counterparty that did not perform, resulting in a $393 million gross loss. Next, we are recognizing a $95 million gross loss due to ERCOT default allocations. These losses comprised of a $83 million cash short pay, plus $12 million NPV of the remaining $102 million on to ERCOT over the next 96 years. As a reminder, ERCOT realized defaults of $3 billion, primarily from through regulated co-ops, Brazos and Rayburn. Finally, we are recognizing a $395 million loss due to ERCOT's management of the grid, particularly during the last 32 hours, when ERCOT kept the market clearing price at the cap, despite having more than 10 gigawatts in reserves. To help put this in context for you, over no time in history has this charge exceeded $5 million. In total, we expect our estimated gross financial losses to be reduced by $275 million to $475 million through bad debt mitigation, recovery of Direct Energy hedged nonperformance, ERCOT default and uplift securitizations and onetime savings, resulting in a net loss of $500 million to $700 million. NRG delivered $567 million of adjusted EBITDA in the first quarter, excluding onetime financial impacts from the storm. This is a 62% increase from the same period last year, primarily driven by the acquisition of Direct Energy. As I mentioned before, we are reinstating our previous financial guidance of $2.4 billion to $2.6 billion for 2021, excluding Uri. Following the close in early January, we immediately began the integration process, achieving $51 million of our 2021 synergy target. In March, we announced the agreement to sell a 4.8 gigawatt portfolio of noncore fossil assets which helps simplify and decarbonize our portfolio. And since the last earnings call, we increased our ERCOT renewable purchase power agreements by nearly 400 megawatts now totaling approximately 2.2 gigawatts. Despite the impact of winter storm Uri, we expect to be at 3 times leverage by the end of 2021 after paying down $385 million of debt from cash available for allocation. I will be providing more details on capital allocation and our full strategic outlook during our Spring Investor Day. In ERCOT, we expect a return to normal 2% annual load growth with residential usage in ERCOT remaining slightly elevated as stay-at-home trends remain, while C&I usage improves throughout the year, returning to pre-pandemic levels by the end of the year. In the East, we see similar trends, although we believe C&I recovery to be pre-pandemic levels could take an additional 12 to 18 months given stronger stay-at-home trends. During the first quarter, we achieved $51 million or 38% of our 2021 synergy target. We are on track to close on the 4.8 gigawatt asset sale in the fourth quarter. For the quarter, NRG delivered $567 million in adjusted EBITDA or $218 million higher than the first quarter of last year, excluding $967 million impact from winter storm Uri. This increase is driven by the acquisition of Direct Energy, which generates approximately 2/3 of its EBITDA during the winter months, given the seasonal shape of East electric and natural gas load. Specific to Direct Energy, we are on track to realize $500 million of adjusted EBITDA in 2021. We are also on track to achieve $135 million of synergies for 2021 as well with $51 million realized in the first quarter, and a goal of at least $300 million annual run rate by 2023. Turning now your attention to the table on the right, the total anticipated growth impact from winter storm Uri is now $975 million. We continue to pursue various offselling solution estimated to be in the range of $275 million to $475 million. This would reduce the economic impact to a net amount of $500 million to $700 million. From a cash standpoint, based on $150 million of estimated bill credits owed to large commercial and industrial customers in 2022, the total negative cash impact in 2021 is expected to be approximately $150 million lower at $350 million to $550 million, including the effect of the offsets previously mentioned. Finally, we are reinstating our 2021 guidance at the original ranges of $2.4 to $2.6 billion for our adjusted EBITDA and $144 billion to $164 billion for our free cash flow before growth. Starting from the left, on the third column, the net capital required for the Direct Energy acquisition was reduced by $38 million based on the latest estimate of the post-closing working capital adjustment. The estimated winter storm Uri capital allocation impact is $825 million, net of anticipated customer bill credit outstanding at the end of the year, and would be at $450 million after deducting the midpoint of our estimated mitigation efforts of $375 million. Absent any mitigation offset recoveries, which are shown in the far right of the chart, the company will still pay down debt by $385 million in 2021 and continue to delever over time to meet its credit profile goals. I will start on the left with our 2021 credit metrics. After adjusting our corporate debt balance for the reduction from our 2021 capital allocation and minimum cash, our 2021 net debt balance will be approximately $7.8 billion. This, when based on the midpoint of our adjusted EBITDA, implies a ratio of just under 3 times to adjusted EBITDA at the end of the year. We also wanted to update you on our latest liquidity position, which are -- which had $4.1 billion as of a few days ago, remains very strong and sufficient to continue supporting our business even during a period of stress. Alberto is a seasoned finance expert who brings over 30 years of experience and a unique combination of consumer, technology, manufacturing and risk management experience.

The updated financial impact from winter Storm Uri, net of our mitigation efforts, is expected to be a net loss of $500 million to $700 million. In total, we expect our estimated gross financial losses to be reduced by $275 million to $475 million through bad debt mitigation, recovery of Direct Energy hedged nonperformance, ERCOT default and uplift securitizations and onetime savings, resulting in a net loss of $500 million to $700 million. I will be providing more details on capital allocation and our full strategic outlook during our Spring Investor Day. For the quarter, NRG delivered $567 million in adjusted EBITDA or $218 million higher than the first quarter of last year, excluding $967 million impact from winter storm Uri. This would reduce the economic impact to a net amount of $500 million to $700 million. I will start on the left with our 2021 credit metrics.

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So for the quarter, earnings -- net income came in at $104 million, $1.11 per share compared to $98.8 million or $1.06 per share last quarter. The -- for the full -- for the first six months of the year, this translates to an ROE of 13.2%, ROA of 115 basis points. Our NII came in at $198 million. Last quarter, it was $196 million. This quarter last year, it was $190 million. NIM contracted a tiny bit from 2.39%, down at 2.37% mostly because of that elevated level of liquidity that I just mentioned. Our cost of deposits dropped from 33 basis points to 25 basis points in the last quarter. DDA grew by $869 million. And by the way, DDA now stands at 31% of deposits for -- it was 25% just at the end of last year. So for those of you who have followed our story for some time, even as recently as a year or 1.5 years ago, we think of 30% as the profitability scale. I'm happy to report we're at 31%. And I think the bar just has been reset, and we think we can actually get -- improve the funding mix even beyond this 31% that we're at today. Provision for credit losses came in at a negative $27.5 million, and Leslie will get into the specifics of how that all evolved. Credit -- criticized classified assets dropped by $541 million. That's a 21% drop. They were $762 million last quarter, now they're down to $497 million. Our NPL ratio, however, went up a little bit from 1% of loans last quarter to 1.28%. If you exclude the guaranteed portion of SBA loans, that number is 1.07%. It's a large credit, $69 million. A $30 million reserve against this loan. Net charge-off ratio was 24 basis points compared to 26 basis points for the full year of 2020. We've announced a share buyback back in February, which is still outstanding by $37.7 million, still outstanding at that. And yesterday, the Board met and approved another $150 million on top of what was already left in the last authorization. CET1, one capital, is 13.5% holdco; 15.1% for the bank. Book value was $33.91 now. The other thing is this quarter -- last quarter, excluding PPP loans, our loan growth was negative $500 million, round number. First, overall average noninterest-bearing deposits grew by $673 million for the quarter or by $2.9 billion compared to the second quarter of 2020. On a period-end basis, noninterest-bearing DDA, as Raj said, grew by $869 million for the quarter while total deposits grew by $877 million. NIDDA has now increased 26% on a year-to-date basis. Most of the growth was driven by new logos coming into the organization, new treasury management relationships, which is showing up strongly in our fee income lines, which were up 31% in terms of service charges. Time deposits declined by $806 million. Money market and interest-bearing checking grew by a total of $815 million. While we did have a decline, excluding the PPP loan forgiveness by $56 million, in the quarter, it began to feel like a more normalized quarter. Residential growth was $494 million for the quarter, including both the residential and the EBO side. And I think most importantly for us, as an indicator, C&I loans were up by $186 million for the quarter, which is really, really a good sign for us. Also even better or just as good as the $186 million, what was nice is there was a good blend of new relationships into the bank as well as existing clients increasing credit facilities during the quarter. At one point, I looked at the pipeline for closing in June, and we had something like 18 deals and all 18 were in different industries. We had $225 million of CRE runoff in the multifamily business. $438 million of First Draw PPP loans were forgiven in Q2. At June 30, there was a total of $209 million of PPP loans outstanding under the First Draw program and $283 million outstanding. On the commercial side, only $3 million of commercial loans are now in short-term deferral. As of June 30, $436 million of commercial loans remained on modified terms under the CARES Act. Although the total CARES Act modified loans in that portfolio declined from $343 million at March 31 to $225 million at June 30. We've seen -- particularly in Florida where about 76% of our hotel portfolio is, we've seen a pretty strong rebound in tourism in Florida. $218 million in commercial loans rolled off of deferral or modification this quarter. 100% of these loans are either paid off or resumed regular payments. On the residential side, excluding the Ginnie Mae early buyout portfolio, $59 million of the loans were on short-term deferral or had been modified under a longer-term CARES Act repayment plan at June 30. Of $532 million in residential loans that were granted an initial payment deferral, $493 million or 93% have rolled off. Of those that have rolled off, 93% have either paid off or making regular payments. When we looked at larger clients in selected data that we see in the office portfolio, it's -- rent collections have run 98%, actually. Both in Florida and New York, it did do strong performance in multifamily, 96% in Florida, 91% in New York. Retail collections were 95% in Florida, 85% in New York, and we continue to see some improvement in the New York retail market. Occupancy averaging 75% for the second quarter of 2021, excluding one New York hotel that did not open until the end of the second quarter. So as Raj mentioned, NIM was down slightly this quarter to 2.37% from 2.39% in large part due to even stronger-than-anticipated headwinds from high levels of liquidity. The yield on loans this quarter increased to 3.59% from 3.58% last quarter. Recognition of fees on PPP loans that were forgiven added 11 basis points to that loan yield this quarter compared to six basis points last quarter. We have $9.8 million of deferred fees on PPP loans that remain to be recognized. $1.1 million of this relates to the First Draw program, and I would expect most of that to come into income in the third quarter. And $8.7 million relates to the Second Draw program, and I really wouldn't expect to see much of any of that in the third quarter. The yield on securities declined from 1.73% to 1.56%. Retrospective method accounting adjustments related to faster prepayments on mortgage-backed securities actually accounted for 10 basis points of that quarterly decline and the rest of the decline, obviously, just attributable to turnover of the portfolio in a lower rate environment. As Raj said, the cost of -- total cost of deposits declined by eight basis points quarter-over-quarter with the cost of interest-bearing deposits declining by 10 basis points. With respect to the FHLB advances, there's still $1.1 billion of cash flow hedges against FHLB advances that are scheduled to mature over the remainder of 2021 with a weighted average rate of 2.4%. And we estimate that if we also normalize the level of securities, we would have seen 14 basis points. So that impact on NIM of high levels of liquidity is somewhere between eight and 14 basis points depending on how you think about it. Overall, the provision for credit losses this quarter was a recovery of $27.5 million. slide s 10 through 12 of our deck provides some further details on the allowance for credit losses. The reserve declined from 95 basis points at March 31 to 77 basis points at June 30. Biggest drivers of that change, $19.4 million of the decrease related to the economic forecast. The reserve decreased by $17.6 million due to net charge-offs and to $16.2 million due to portfolio changes, that bucket includes things like the net decrease in loans; shift into portfolio segments with lower expected loss rates, such as residential; as well as the impact of just loans moving in and out of the portfolio; and improving borrower financial statement spreads. $12.8 million decrease in the amount of qualitative overlays that had related to some uncertainties around the COVID pandemic that we -- that seem to be resolving themselves and an increase of $20.7 million related to risk rating migration, most of that was the $27.2 million increase in the reserve related to the $169 million commercial relationship that Raj spoke about bringing that reserve up to $30 million. Total criticized and classified loans declined by $541 million; special mention, down by $282 million; and substandard accruing, down by $299 million; substandard non-accruing loans increased by $40 million, again, back to that one commercial loan that we've been talking about. We continue to see increases in deposit service charges and fees stemming from our treasury management solutions initiatives that we initiated in conjunction with BankUnited 2.0. With respect to the tax rate, I would expect it to remain around 26%. And so as of last night, our deposit cost was at 20 basis points.

So for the quarter, earnings -- net income came in at $104 million, $1.11 per share compared to $98.8 million or $1.06 per share last quarter.

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Actual events and results may differ materially as a result of the risks we face, including those discussed in Exhibit 99.1 of our SEC filings. We anticipate that fiscal 2020 revenue will range between 3.15 to $3.25 billion and diluted earnings per share to range between $2.95 and $3.15 per share. Cash from operations is now expected to range between 250 and $300 million and free cash flow between 200 to $250 million. Revenue for the second quarter of fiscal 2020 totaled $818.1 million, which included the full ramp-up of the Census contract in the US federal services segment. Total company operating margin was 4.6% and diluted earnings per share were $0.43, reflecting two substantial impacts in the quarter. First, we had a pandemic-related writedown of approximately $24 million or $0.28 per share related to the decline in estimates for future period outcomes-based payments on welfare-to-work programs in the United Kingdom and Australia. Second, a change order for approximately $9 million or $0.11 per share was signed after quarter end in the US health and human services segment. Second-quarter revenue for the US health and human services segment increased 6.2% over the prior year and all growth was organic, resulting from new contracts and the expansion of existing work. Both revenue and the 15% operating margin were tempered largely by the change order previously discussed. Our current assumptions indicate economics for this segment will continue to experience minor disruption, and we expect an operating margin between 17% and 18% for the full year. Revenue for the second quarter of fiscal in the US federal services segment increased to $393.4 million. Excluding the citizen engagement centers' contracts, organic growth was 6.7%, driven by new work and growth on existing contracts. The operating margin for this segment in the second quarter of fiscal 2020 was 7.7%, which was tempered by unfavorable impacts from the COVID-19 pandemic on performance-based work and ongoing investments in business development. The Census contract is now approaching its peak level of operations and delivered approximately $140 million of revenue in the second quarter, yielding year-to-date revenue of approximately $210 million. As a result, our contract has expanded to support the new deadline and we now estimate that the Census contract will deliver between $430 and $450 million for the full year. This is an increase from our previously expected revenue of $360 million in fiscal 2020 from this contract. The US federal services segment is estimated to deliver a full-year operating margin between 8% and 9% resulting from a slightly greater mix of cost plus work from previously anticipated, as well as our continued investment in both business development and technical capability. Second-quarter revenue was $116.0 million and this segment had a loss of $26.7 million. This resulted in a pandemic related writedown of approximately $24 million or $0.28 per share related to a decline in estimates for future period outcomes-based payments on welfare-to-work programs in the United Kingdom and Australia. We finished the second quarter with cash and cash equivalents of approximately $126 million. Cash provided by operations was $22 million. Free cash flow was $13.4 million in the quarter. DSOs were 72 days. We are continuing to monitor collections closely and I would like to point out that one day of DSO is roughly $9 million receivables, which directly impacts estimated cash provided by operations and free cash flow. Our quarterly 10b5-1 Share Purchase Plan expired naturally in March when the cap embedded in the program was met. While the Act does not apply to MAXIMUS because we have more than 500 employees, we felt it provided a good benchmark for supporting and safeguarding our employees. For example, we leveraged our planned migration to Amazon Web Services or AWS to provision nearly 9000 secure agent desktops through the Amazon WorkSpaces as a service model thus far, in addition to approximately 7500 VPN connection users. This 24/7 coverage began with 50 agents and has grown 250 plus more than 40 nurses. Our most recent statistics show that we are responding to more than 16, 000, and 2000 emails per day. We were also selected to deliver the Federal Health and Human Services community-based testing centers or result center. The contract launched with 260 call center agents, making outbound calls to patients to deliver test results from 47 emergency facilities across the US Today, a team of more than 2,000 agents now contacts 10,000 individuals per day and provides real-time geo-mapping of COVID-19 test results to the US Department of Health and Human Services. Within 10 days of this waiver, MAXIMUS sent more than 2 million letters to student loan holders and made system changes to support the waivers. Our call center representatives have managed to successfully connect more than 30,000 New Yorkers to critical COVID-19 testing resources and obtain more than 14,500 responses from healthcare workers through surveys. We'll hire and train an estimated 500 people under the supervision of the Indiana State Department of Health epidemiologists. As of May 1st, more than 30 million people in the United States filed claims triggered by the COVID-19 pandemic. This was done in less than a week to support the division of economic security and has rapidly scaled to 1800 agents. For the second quarter of fiscal-year 2020, signed awards were $729.8 million of the total contract value at March 31st. Further, at March 31st, there were another $215.8 million worth of contracts that had been awarded, not yet signed. Our total contract value pipeline at March 31st was $29.2 billion, compared to $30.6 billion reported in the first quarter of FY '20. Of our total pipeline of sales opportunities, 65.7% represents new work. As Rick mentioned, one of the most inspiring stories comes from our colleagues in the United Kingdom, where we're in the process of deploying nearly 1,000 volunteer doctors, nurses, and other clinicians to the NHS to provide vital support on the front line. This represents the true heart of MAXIMUS and our more than 35,000 employees around the world.

We anticipate that fiscal 2020 revenue will range between 3.15 to $3.25 billion and diluted earnings per share to range between $2.95 and $3.15 per share. Cash from operations is now expected to range between 250 and $300 million and free cash flow between 200 to $250 million. Revenue for the second quarter of fiscal 2020 totaled $818.1 million, which included the full ramp-up of the Census contract in the US federal services segment. Total company operating margin was 4.6% and diluted earnings per share were $0.43, reflecting two substantial impacts in the quarter. First, we had a pandemic-related writedown of approximately $24 million or $0.28 per share related to the decline in estimates for future period outcomes-based payments on welfare-to-work programs in the United Kingdom and Australia. Second, a change order for approximately $9 million or $0.11 per share was signed after quarter end in the US health and human services segment. This resulted in a pandemic related writedown of approximately $24 million or $0.28 per share related to a decline in estimates for future period outcomes-based payments on welfare-to-work programs in the United Kingdom and Australia. We were also selected to deliver the Federal Health and Human Services community-based testing centers or result center.

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As such, our book value has fluctuated this year from being up 5.2% in the first quarter, to declining 6.6% in the second quarter. Our year-to-date performance remained solid as our total economic return deposited 2.4%. Our goal is to generate a cash return between 8% to 10%. Most importantly, since this new era in history began last year, we have outperformed our industry and other income-oriented vehicles with a 28% total shareholder return as noted on Slide 5. For the second quarter, we reported a comprehensive loss of $0.98 per common share, and a total economic return of minus $0.93 per common share or a minus 4.6%. We also reported core net operating income of $0.51 per common share, an increase of 10% over last quarter's $0.46 per common share, and well exceeding our $0.39 quarterly common stock dividend. Book value per share declined $1.32 or minus 6.6%, principally from economic losses on the investment portfolio of $48 million or $1.49 per common share, driven in part by mortgage spread widening and in part due to the lower rate environment during the quarter versus our hedge position. In terms of specific performance, TBAs and dollar roll specialness continue to be important contributors to results for the quarter, adding an incremental $0.06 per common share to core net operating income, which was partially offset by lower earnings from a smaller pass-through portfolio. In addition, G&A expenses were lower by $0.02 on a per-share basis and preferred stock dividend on core earnings per share was lower by $0.04 per share. Average interest-earning assets, including TBAs increased to $4.8 billion versus $4.3 billion, as we deploy the capital raised over the first half of the year. At quarter end, interest-earning assets, including TBAs, were $5.4 billion versus $5.2 billion at the end of last quarter and leverage including TBA dollar rolls, was 6.7 times versus 6.9 times last quarter. Adjusted net interest spread increased eight basis points this quarter to 195 basis points, driven largely by the company's TBA position and a modest decline in repo borrowing cost. The company's implied funding cost for its TBA dollar roll transactions was approximately 49 basis points lower than its repurchase agreement financing rate during the second quarter of 2021, an increase of 10 basis points in specialness relative to the prior quarter. Regarding Agency RMBS prepayment speeds, they were essentially unchanged at 19% CPR for the quarter versus 18.6% EPR for quarter 1. Overall, total shareholders' capital grew approximately $25 million during the quarter. This includes $68 million in new common equity raised through at the market offerings in the quarter. Our capital issuances added $0.07 per common share to book value for the quarter. Financing in the TBA market has continued to be strong, contributing 1% to 3% excess core ROE versus pools. And as returns are now in the 10% to 12% core ROE range, we have reinvested a portion of that capital, growing the balance sheet from a low point of $4.5 billion in the second quarter to $5.6 billion thus far in the third quarter. We allocated out of TBAs into specified pools as pay-ups declined substantially in May, and we added outright marginal investments in Fannie 2.5 specified pools as well as Fannie two TBAs with wider spreads in June and July. Our total economic return year-to-date is 2.4%, with book value on June 30 at $18.75, relatively unchanged versus year-end. In the third quarter thus far, MBS spreads are wider and as the yield curve has flattened dramatically in July, book value has fluctuated with yields in a range of flat to down about 5% versus quarter end. Leverage at the end of the quarter stood at 6.7 times, and we have the potential for two more turns from here. We are on track for an 8% dividend yield on beginning book value for the year, with the excess core earnings providing a cushion to capital. We expect that front-end rates will remain low, close to 0 through 2022, providing a solid base from which to generate returns. In the short term, we expect choppy action in the markets to continue, and our current thinking is that 10-year yields will trade in a range between 1% and 1.5%. In the medium term, there is room for 10-year yields to move to a higher range, 1.5% to 1.75%. We are very respectful of a near-term scenario, resulting in yields remaining at the lower end of the 1% to 1.5% in the 10-year rate, as I mentioned earlier. Mortgage rates are below 3%, originators are fully staffed and government policies favor broader access to refinancing and modifications. We have relatively low starting leverage, over $400 million in liquidity and dry powder of two turns of leverage to drive future earnings power and total economic return generation well in excess of our cost of capital. Dynex Capital, our number 1 purpose is to make lives better by being good stewards of individual savings. Over the past 14 years, since I joined Dynex, we have earned your trust as we have managed our business with an ethical focus, remained patient and looking for the right opportunities to invest your savings at attractive long-term returns.

For the second quarter, we reported a comprehensive loss of $0.98 per common share, and a total economic return of minus $0.93 per common share or a minus 4.6%. We also reported core net operating income of $0.51 per common share, an increase of 10% over last quarter's $0.46 per common share, and well exceeding our $0.39 quarterly common stock dividend.

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We reported net income of $126 million or $0.67 per share for the third quarter and adjusted diluted net operating income per share was also $0.67. We grew our book value per share by 9% year-over-year. We achieved this growth even after accounting for more than $100 million of dividends that we returned to stockholders over the past year. During the third quarter, we wrote $26.6 billion of high-quality new mortgage insurance business and our primary insurance in-force grew by $4.3 billion from the second quarter to $241.6 billion at September 30. We have seen continued improvement in the credit performance of our portfolio, with a 46% year-over-year decline in our total number of defaulted loans. We saw 60% decline year-over-year in the number of new notices of default received in the quarter. The cure-to-new default ratio in the third quarter of 2021 was 178%. Based on September data from our own Radian Home Price Index continued strong housing demand and relatively limited supply in the market led to an annualized 17.6% increase in home prices across the country. Our new mortgage insurance business was 90% purchase volume in the third quarter versus only 71% a year ago. Based on updated market projections for our 2021 mortgage originations, we now expect the private mortgage insurance market to be approximately $575 million to $600 billion, which would be slightly lower than the record volume in 2020, but still represent the second highest MI volume year in history. Looking ahead, total mortgage originations for 2022 are estimated to be approximately $3 trillion, reflecting a 10% increase in purchase originations and a 55% decrease in refinance activity. Turning to our Homegenius segment, total revenues for the third quarter were $45.1 million, representing a 35% increase from the second quarter of 2021 and a 51% increase year-over-year. This was primarily driven by an increase in our title revenue, which grew 106% year-over-year as well as growth in our valuation business. In terms of capital strength, at September 30, Radian Group maintained a strong capital position with $1 billion of total holding company liquidity. Additionally, at September 30, Radian Guaranty's PMIERs excess available assets, was $1.7 billion or a cushion of 49%. Notably, the recent lifting of the preferred stock purchase agreement caps on layered risk, the newly proposed amendment to the Enterprise capital framework to reduce GSE-required capital levels and the various direct market actions such as eliminating the 50 basis point adverse market fee for refinance loans and expanding eligibility for the refi now and refi hospital programs represent a notable shift in focus. To recap our financial results issued last evening, we reported GAAP net income of $164.1 million or $0.67 per diluted share for the third quarter of 2021 as compared to $0.80 per diluted share in the second quarter of 2021 and $0.70 per diluted share in the third quarter of 2020. Adjusted diluted net operating income was $0.67 per share in the third quarter of 2021 compared to $0.75 in the second quarter of 2021 and $0.59 in the third quarter of 2020. As Rick mentioned earlier, our new insurance written was $26.6 billion during the quarter compared to $21.7 billion in the second quarter of 2021 and $33.3 billion in the third quarter of 2020. New insurance written for purchase transactions was $23.9 billion, an increase of 2% year-over-year and 43% compared to the second quarter of 2021. Purchase volume accounted for 90% of our total new insurance written for the third quarter, an increase from 77% of volume in the prior quarter and 70.5% in the third quarter of 2020. Primary insurance in-force increased $4.3 billion during the quarter to $241.6 billion. On a year-over-year basis, primary insurance in-force has declined approximately 2%, primarily driven by sustained low persistency resulting from policy cancellations during a low interest rate, high refinance period. It is important to note, however, the mix shift of our in-force portfolio during this past year, monthly premium insurance in-force, which drives the majority of our earned premiums, has grown 6% year-over-year compared to a 25% decline in single-premium insurance in-force. Our quarterly annualized persistency rate was 67.5% this quarter, an increase from 66.3% in the second quarter of 2021 and 60% in the third quarter of 2020. Moving now to our earned premiums and other revenues, total net premiums earned were $249.1 million in the third quarter of 2021 compared to $254.8 million in the second quarter of 2021 and $286.5 million in the third quarter of 2020. Title premiums increased to $12.3 million in the third quarter of 2021 compared to $7.7 million in the second quarter of 2021. Our direct in-force premium yield was 40.3 basis points this quarter compared to 41.1 basis points last quarter and 43.2 basis points in the third quarter of 2020. Our Homegenius segment revenues were $45.1 million for the third quarter of 2021, representing a 35% increase compared to the second quarter of 2021 and a 51% increase compared to the third quarter of 2020. Our reported home genius pre-tax operating loss before allocated corporate operating expenses was $600,000 for the third quarter of 2021 compared to a loss of $4.5 million for the second quarter of 2021. Our reported Homegenius adjusted gross profit for the third quarter of 2021 was $17.9 million compared to $11.7 million for the second quarter of 2021. As noted on Slide 22, we continue to make progress against our targets as communicated earlier this year, with Homegenius revenues still tracking toward our goal of $150 million for 2021. Our investment income this quarter of $36 million was relatively flat compared to the prior quarter and same quarter prior year due to the lower investment yields, which were partially offset by additional investment balances from underwriting cash flow. At quarter end, the investment portfolio duration was approximately 4.5 years, unchanged from the prior quarter. Moving now to our loss provision and credit quality, as noted on Slide 13, the mortgage provision for losses for the third quarter of 2021 was $16.8 million, an increase compared to $3.3 million in the second quarter of 2021 and a decrease compared to $87.8 million in the third quarter of 2020. As shown on Slide 14, we had approximately 8,100 new defaults in both the third and second quarters of 2021 compared to approximately 21,000 in the third quarter of 2020. Also, as noted on Slide 13, the provision for losses for the third quarter 2021 includes a positive development on prior defaults of $16.5 million. We maintained our prior quarter assumptions for defaults reported since the start of the pandemic, including the default to claim rate assumption on new defaults at 8% for the third quarter of 2021. As shown on Slide 16, 67% of all defaults were reported to be in a forbearance program as of September 30, 2021. It should also be noted that approximately 89% of new defaults from the second quarter of 2020 and 85% of new defaults from the third quarter 2020 have cured as of the end of October. Now turning to expenses; other operating expenses were $86.5 million in the third quarter of 2021, flat to the second quarter of 2021 and increased compared to $69.4 million in the third quarter of 2020. The increase in other operating expenses as compared to the prior year is primarily related to an increase in incentive compensation expense, including long-term share-based incentive compensation as well as a $6.7 million decrease in ceding commissions associated with lower single premium acceleration. Over the next year, we expect consolidated normalized quarterly operating expenses to grow from approximately $72 million to approximately $85 million which will depend largely on the timing and the execution of our Homegenius segment revenue growth strategy. Our mortgage segment, however, should have relatively flat quarterly expenses at just under $60 million. Moving now to taxes; our overall effective tax rate for the third quarter of 2021 was 21.8%. Our annualized effective tax rate for 2021 and before discrete items remains generally consistent with the statutory rate of 21%. Now moving to capital and available liquidity; Radian Guaranty's excess available assets over minimum required assets was $1.7 billion as of the end of the third quarter, which represents a 49% PMIERs cushion. In connection with this transaction, Radian Guaranty will receive $484.1 million of fully collateralized aggregate excess of loss reinsurance coverage from Eagle Re at closing. The excess of loss reinsurance will cover mortgage insurance losses on new defaults on an existing portfolio of eligible policies with risk in force of $10.8 billion that were issued predominantly between January 1, 2021 and July 31, 2021. For Radian Group, as of September 30, 2021, we maintained $768 million of available liquidity compared to $923 million as of June 30, 2021. Along with our recurring shareholder dividend payment, partially offset by a $36 million ordinary dividend paid by our Radian Reinsurance subsidiary. Total liquidity, which includes the company's $267.5 million credit facility, was $1 billion as of September 30, 2021. During the third quarter of 2021, we repurchased 7.1 million shares and year-to-date through October 31, we have purchased 13.3 million shares or approximately 7% of our outstanding shares at an average share price of $22.78 or an approximate 3% discount to our current book value. As of October 31, we have approximately $95 million of remaining repurchase authorization which expires on August 31 of next year. We have also continued to pay a dividend to common shareholders throughout the pandemic, including during the third quarter of 2021, as we returned approximately $27 million to shareholders through dividends during the quarter. As a reminder, and as previously announced, we increased our quarterly dividend by 12% to $0.14 per share during the second quarter of this year. The combination of dividend payments and share repurchase represent a return of capital of approximately 82% of our after-tax operating income for this year. We wrote $26.6 billion of high-quality new mortgage insurance business, which helped grow our primary mortgage insurance in force to $241.6 billion, Homegenius revenues increased by 51% year-over-year. During the quarter, we were recognized as a champion of Board Diversity by the Forum of Executive Women and raised a total of $165,000 for the NBA Open Store Foundation, an organization that shares our mission of enabling and protecting homeownership.

We reported net income of $126 million or $0.67 per share for the third quarter and adjusted diluted net operating income per share was also $0.67. Turning to our Homegenius segment, total revenues for the third quarter were $45.1 million, representing a 35% increase from the second quarter of 2021 and a 51% increase year-over-year. To recap our financial results issued last evening, we reported GAAP net income of $164.1 million or $0.67 per diluted share for the third quarter of 2021 as compared to $0.80 per diluted share in the second quarter of 2021 and $0.70 per diluted share in the third quarter of 2020. Adjusted diluted net operating income was $0.67 per share in the third quarter of 2021 compared to $0.75 in the second quarter of 2021 and $0.59 in the third quarter of 2020. Our Homegenius segment revenues were $45.1 million for the third quarter of 2021, representing a 35% increase compared to the second quarter of 2021 and a 51% increase compared to the third quarter of 2020.

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If you recall, the Andre the Giant documentary from 2018 was not only the highest-rated sports documentary on HBO in the last 15 years, but was the highest-rated documentary on HBO in the last 15 years. 2.4 million total viewers watch content across all tiers, representing a 60% increase. And those viewers watched 37 million hours of content, which was an 8% increase. Perhaps more importantly, average paid subscribers to the network increased by 6% to $1.6 million. WrestleMania went from a sold-out Raymond James stadium in Tampa, Florida, with over 80,000 people to a two-night event at our performance center with no one in attendance. On August 21, we launched what we call WWE ThunderDome. We partnered with the famous group to bring nearly 1,000 live virtual fans back to our show. And we have seen a lift in the ratings of 6% for Raw and 12% for Smackdown as compared to the prior four weeks without fans. The CWC launched on October four for NXT's live special Takeover 31. And as more and more people started to gravitate to streaming platforms, we adjusted our digital posting strategy to incorporate new original content, longer matches versus clips, and resurfaced high-performing historical content across YouTube, Facebook and WWE Network, resulting in increased digital views of 28% excluding the impact of geographical restrictions in India. We recently surpassed 50 billion views on YouTube, making WWE the fifth most viewed YouTube channel in the world. Wow, I wouldn't want to follow that. WWE generated third quarter revenue of $221.6 million, up 19% and adjusted OIBDA of $84.3 million, up more than 2 times, both were driven primarily by higher rights fees from U.S. distribution agreements. During the quarter, WWE executed a reduction in force, resulting in severance expense of $5.5 million. Looking at the WWE media segment, adjusted OIBDA increased approximately $60 million to $101.7 million, primarily due to higher domestic rights fees for Raw and Smackdown programs. Despite a challenging environment, WWE continued to produce a significant amount of content, more than 550 hours of programming for television, streaming and social digital platforms. Although third quarter ratings for Raw and Smackdown declined 29% and 2%, respectively, they showed improvement from July to September. And they achieved this result despite unprecedented competition from the return of major sports, such as the NBA, NFL, MLB and including playoffs and Premier events, such as the Kentucky Derby and the Indy 500. Adjusted OIBDA from live events declined by $1.2 million to a loss of $4.1 million due to a $22.5 million decline in live event revenue. Licensing revenue reflected a 25% sales increase from the franchise game, WWE 2K20 and continue to benefit from the build-out of WWE's video game and toy portfolios. As of September 30, 2020, WWE held approximately $638 million in cash and short-term investments. This includes $200 million borrowed under WWE's revolving credit facility to ensure the necessary capital to execute the company's strategy and deliver long-term value to our shareholders. In the third quarter, WWE generated approximately $111 million in free cash flow, an increase of $127 million. WWE anticipates $40 million to $45 million in incremental fourth quarter expenses versus the third quarter. This is due to $22 million to $27 million from, one, incremental production expenses associated with the creation of WWE ThunderDome and Capitol Wrestling Center; and two, incremental personnel expenses associated with employees returning from furlough. Also contributing to the incremental increase in expenses is that WWE booked $18 million in production incentives in the third quarter 2020. WWE is currently developing its 2021 operating and financial plan and continues to evaluate the personnel requirements and potential investments needed to support WWE's long-term strategy. Going forward, the potential impact of COVID-19 on WWE's business, which could be material, remains uncertain. Given the lack of visibility, WWE did not buy back any stock in the third quarter under its $500 million stock repurchase program, but may resume activity on an opportunistic basis in the future.

Perhaps more importantly, average paid subscribers to the network increased by 6% to $1.6 million. Wow, I wouldn't want to follow that. WWE generated third quarter revenue of $221.6 million, up 19% and adjusted OIBDA of $84.3 million, up more than 2 times, both were driven primarily by higher rights fees from U.S. distribution agreements. WWE anticipates $40 million to $45 million in incremental fourth quarter expenses versus the third quarter. WWE is currently developing its 2021 operating and financial plan and continues to evaluate the personnel requirements and potential investments needed to support WWE's long-term strategy. Going forward, the potential impact of COVID-19 on WWE's business, which could be material, remains uncertain.

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Today's results represent only our very first 90 days together, and I'm delighted with what the team has already been able to accomplish in just that short amount of time. As Marshall will discuss in a moment, we are now tracking to a 30% non-GAAP earnings per share accretion, which is above the 25% that we previously targeted. Specific to the PC ecosystem, we remain cautiously optimistic given the opportunities in the commercial space with the Windows 11 refresh cycles and upgrade for advanced security features, offset by some moderation in the consumer segment. I am proud of our teams who collaborated well, executed flawlessly, and adjusted to many changes in our first 90 days together. Total worldwide revenue came in at 15.6 billion, down 2% from the prior year. We are pleased with this result, given the tough comparison to prior year, supply chain constraints, and newness of operating as one company as well as an approximate 1% FX headwind due to the euro weakening against the dollar. Gross profit was 943 million, and gross margin was 6%, reflecting solid execution by the team and a continued favorable mix of products and services. Total adjusted SG&A expense was 559 million, representing 3.6% of revenue and in line with our expectations. Non-GAAP operating income was 408 million and non-GAAP operating margin was 2.6%. Non-GAAP interest expense and finance charges were 42 million and the non-GAAP effective tax rate was 24%. Total non-GAAP income from continuing operations was 276 million and non-GAAP diluted earnings per share from continuing operations was $2.86. We ended the quarter with cash and cash equivalents of 994 million and debt of 4.1 billion. Our gross leverage ratio was 2.6 times and net leverage was two times. Accounts receivable totaled 8.3 billion and inventories totaled 6.6 billion. Our net working capital at the end of the fourth quarter was 2.7 billion, and our cash conversion cycle for the fourth quarter was 14 days, which was in line with our expectations. Cash provided from operations was approximately 561 million in the quarter. Given the numerous positive drivers for the company, we remain on course of delivering approximately 1 billion of free cash flow by the end of fiscal 2023. Our long-term capital allocation strategy over the next two to three years is to distribute approximately 50% of our free cash flow to our shareholders in the form of dividends and share repurchases. For the current quarter, our board of directors has approved a quarterly cash dividend of $0.30 per common share. Negatively impacting these gross expectations are FX, which is expected to impact us by approximately 1.1 billion; and gross versus net revenue adjustment of 1.2 billion, which is the result of aligning policies between the two companies. Given this progress and the view regarding fiscal 2022, we now expect to realize a 30% accretion to non-GAAP earnings per share in fiscal 2022 compared to fiscal '21 legacy SYNNEX stand-alone results. This represents an improvement from our initial target of 25% accretion. For fiscal '22, we expect non-GAAP earnings per share to be between $10.80 and $11.20 per diluted share. This also assumes a negative 22 million headwind to non-GAAP net income or $0.18 per share, primarily associated with the weakening of the euro since the date we first performed our merger accretion assessment. We expect total revenue to be in the range of 14.75 billion to 15.75 billion, which, when adjusted for FX of approximately 450 million and gross versus net adjustments of approximately 300 million, represents an expected year-over-year growth rate in the mid-single digits. Our backlog level continues to be elevated, and we estimate the impact of fiscal Q1 revenue to be approximately 5%. Non-GAAP net income is expected to be in the range of 245 million to 275 million and non-GAAP diluted earnings per share is expected to be in the range of $2.55 to $2.85 per diluted share based on weighted average shares outstanding of approximately 96 million. Interest expense is expected to be approximately 38 million, and we expect non-GAAP tax rate to be approximately 24%.

For fiscal '22, we expect non-GAAP earnings per share to be between $10.80 and $11.20 per diluted share. We expect total revenue to be in the range of 14.75 billion to 15.75 billion, which, when adjusted for FX of approximately 450 million and gross versus net adjustments of approximately 300 million, represents an expected year-over-year growth rate in the mid-single digits. Non-GAAP net income is expected to be in the range of 245 million to 275 million and non-GAAP diluted earnings per share is expected to be in the range of $2.55 to $2.85 per diluted share based on weighted average shares outstanding of approximately 96 million.

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Yesterday, we reported solid second quarter results, underpinned by strong top line growth as a result of the pockets of attractive pricing and volume, resulting in an annualized return on average equity in the first half of 2020 of 15.5%. Clovered continues to be an attractive growth opportunity for us with approximately 40% premium growth from the year ago quarter to its total book of business, while growing non risk bearing business by over 200% in the same time period. Clovered represents Universal Property & Casualty's fastest growing agency across it's nearly 10,000 independent agents. We are taking a more measured approach to guidance as a result of previously announced, but starkly above average weather events in the second quarter. EPS for the quarter was $0.62 on a GAAP basis and $0.52 on a non-GAAP adjusted earnings per share basis, and $1.23 and $1.32 for the first half of 2020, respectively. Direct premiums written were up 13.1% for the quarter, led by strong direct premium growth of 14.5% in states outside of Florida and 12.8% in Florida. For the first half of 2020, direct premiums written were also up double digits, led by 16.5% in states outside Florida and 13.8% in Florida. On the expense side, the combined ratio increased 12.6 points for the quarter to 99.5% and 9.8 points for the first half of 2020 to 96.8%. Total services revenue increased 16.8% to $16.1 million for the quarter and 20.9% to $31.5 million for the first half of 2020, driven primarily by commission revenue earned on ceded premiums. On our investment portfolio, net investment income decreased 16.6% to $6.2 million for the quarter and 16.3% to $13 million for the first half of 2020, primarily due to lower yields on cash and short term investments during the first half of 2020 when compared to the first half of 2019. Also to note, we had an increase in our cash and cash equivalents position by 82.2% when compared to the end of 2019 as a result of taking a defensive posture as COVID-19 impacts continue to be felt across the global economy. In regards to capital deployment, during the second quarter, the company repurchased approximately 572,000 shares at an aggregate cost of $10 million. For the first half of 2020, the company repurchased approximately 884,000 shares at an aggregate cost of $16.6 million. The company's current share repurchase authorization program has $11.7 million remaining as of June 30, 2020, and runs through December 31, 2021. On July 6, 2020, the Board of Directors declared a quarterly cash dividend of $0.16 per share payable on August 7, 2020, to shareholders of record as of the close of business on July 31, 2020. We now expect a GAAP earnings per share range from $2.31 to $2.61 and a non-GAAP adjusted earnings per share range of $2.40 to $2.70, assuming no extraordinary weather in the latter half of 2020 and no realized or unrealized gains for the second half of 2020. This would yield a return on average equity derived from GAAP measures between 13.5% and 16.5% for the full year. As of 6/30, Hurricanes Matthew and Florence each were in the single-digit open claims and continue to be very near the end. Hurricane Michael had a little over 100 claims open. And as we start to approach the end on this storm, we did elect to book a modest $9.5 million increase in gross ultimate as of 6/30. This change does not impact our net loss position. On Hurricane Irma, despite the fact that 1,800 new claims were reported during the second quarter, we still successfully reduced the remaining open claim count. As of 6/30, the open Irma account stood at just over 450 we are preparing for the three year statute of limitation for filing new Irma claims to pass in early September, so we can make a final push on closing this event. There was no change to the ultimate as of 6/30. We were directly impacted by 14 different second quarter PCS events, which led us to book an additional $17 million of net pre-tax loss beyond our original weather loss plan as of 6/30. The final estimated cost was in line with our original guidance at approximately 34.6% of estimated direct earned premium for the 12-month treaty period. This compares to 33.3% at this time last year, reflecting a 4.1% increase year-over-year.

We are taking a more measured approach to guidance as a result of previously announced, but starkly above average weather events in the second quarter. EPS for the quarter was $0.62 on a GAAP basis and $0.52 on a non-GAAP adjusted earnings per share basis, and $1.23 and $1.32 for the first half of 2020, respectively. Direct premiums written were up 13.1% for the quarter, led by strong direct premium growth of 14.5% in states outside of Florida and 12.8% in Florida. We now expect a GAAP earnings per share range from $2.31 to $2.61 and a non-GAAP adjusted earnings per share range of $2.40 to $2.70, assuming no extraordinary weather in the latter half of 2020 and no realized or unrealized gains for the second half of 2020. This change does not impact our net loss position.

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Today, we reported all-time record quarterly results with earnings per share of $5.12, an increase of 115% compared to adjusted earnings per share of $2.38 last year. Our third quarter same-store revenue of $6.4 billion was up 18% compared to the prior year as well as the third quarter of 2019. In the third quarter, we self-sourced 90% of our pre-owned vehicle retail sales and our same-store used vehicle revenue increased 63% year-over-year. Our rollout schedule remains on track with 12 additional stores planned for 2022 and over 130 stores by the end of 2026. Today, we announced that we signed an agreement to acquire Priority 1 Automotive Group, adding $420 million in annual revenue. Together with our previously announced acquisition from Peacock Automotive Group, AutoNation has announced $800 million in annual revenue from acquisitions this year. Over the last 12 months, through the end of the third quarter, we repurchased 27% of our shares outstanding from September 30 last year. Today, we reported net income of $362 million or $5.12 per share versus adjusted net income of $212 million or $2.38 per share during the third quarter of 2020. This represents our sixth consecutive all-time high quarterly earnings per share and 115% increase year-over-year. For the quarter, same-store variable gross profit increased 42% year-over-year, driven by an increase in total combined units of 4% and an increase in total variable PVR of $1,709 or 39%. A decline in new units of 11% was more than offset by growth in used units of 20%. Our customer care business has recovered with same-store customer care gross profit increasing 8% on a year-over-year basis and 6% compared to the third quarter of 2019. Taken together, our same-store total gross profit increased 29% compared to the prior year and 45% compared to the third quarter of 2019. Third quarter SG&A as a percentage of gross profit was 56.9%, a 750 basis point improvement compared to the year ago period on an adjusted basis. As measured against gross profit on an adjusted basis, our metrics improved across all key categories, with overhead decreasing 390 basis points, compensation decreasing 290 basis points and advertising decreasing 70 basis points. We expect SG&A as a percentage of gross profit to remain below 60% for the fourth quarter and the full year 2021. Floorplan interest expense decreased to $5 million in the third quarter of 2021, due primarily to lower average floorplan balances. Our cash balance at quarter end was $72 million, which combined with our additional borrowing capacity resulted in total liquidity of approximately $1.8 billion. We remain on track to open two additional stores in the fourth quarter and 12 more in 2022. Again, as Mike mentioned, longer term we continue to target over 130 stores by the end of 2026. In addition to organic growth initiatives, today we announced the acquisition of Priority 1 Automotive Group. During the third quarter, we purchased 7.9 million shares for an aggregate purchase price of $879 million. This represents an 11% reduction in shares outstanding for the fourth quarter alone. Today, we announced that our board has authorized an additional $1 million for share repurchase. With this increased authorization, the company has approximately $1.3 billion available for additional share repurchase. As of October 19, there were approximately 66 million shares outstanding. At the end of the third quarter, our covenant leverage ratio of debt to EBITDA was 1.4 times, up slightly from 1.2 at the end of the second quarter, but still well below our historical range of 2.0 to 3.0 debt to EBITDA. It's been my honor to serve in a leadership position of AutoNation for the past 22 years.

Today, we reported all-time record quarterly results with earnings per share of $5.12, an increase of 115% compared to adjusted earnings per share of $2.38 last year. Our third quarter same-store revenue of $6.4 billion was up 18% compared to the prior year as well as the third quarter of 2019. Today, we announced that we signed an agreement to acquire Priority 1 Automotive Group, adding $420 million in annual revenue. Today, we reported net income of $362 million or $5.12 per share versus adjusted net income of $212 million or $2.38 per share during the third quarter of 2020. In addition to organic growth initiatives, today we announced the acquisition of Priority 1 Automotive Group. Today, we announced that our board has authorized an additional $1 million for share repurchase.

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I'd like to again begin my remarks today by expressing my gratitude to our TreeHouse employees, especially the roughly 9,500 frontline workers in our supply chain. As part of that effort, we reduced roughly 11,000 SKUs, exited 11 manufacturing facilities and meaningfully reduced the number of warehouse shippoints. We also turned our attention to simplifying our systems by consolidating finance and IT platforms, going from 13 ERPs to 3 and 100% order to cash on SAP. In total, we delivered on each of our commitments our efforts resulted in meaningful financial impact including delivering approximately $400 million in run rate cost savings, offsetting a roughly similar amount of headwinds due to inflation and lost volume. In the fourth quarter, we delivered organic revenue of $1.17 billion with Riviana contributing another $12 million. Our results were just over the high end of our guidance range, representing 3.3% growth or 4% on an organic basis. This was driven by strong organic growth of 8.1% in our snacking and beverage business and steady 1.3% organic growth in our meal preparation business. For the year, we delivered 2.7% organic net sales growth, driven by outsized growth trends in unmeasured channels, increasingly composed of some of the fastest growing food retailers in the country. On slide 7, we summarize the tremendous progress we've made in generating free cash flow of nearly $300 million for the year, allowing us to more quickly achieve our leverage target range. After the acquisition, we finished the year with leverage of 3.1 times. Financially, deal will have an immediate impact as we expect to add $170 million to $180 million in revenue on a normalized basis and in 2021 generate $25 million to $30 million in EBITDA and accretion of $0.20 to $0.30 per share. Approximately 35% of our revenue is generated from categories like these, which we are outperforming private label. We delivered against all of our key metrics and outperformed on the top line at $1.18 billion, which includes Riviana. Fourth quarter adjusted EBITDA was $154 million and adjusted earnings per share totaled $1.07. Meal prep organic growth of 1.3% was driven by a combination of volume, mix and pricing. The addition of the Riviana pasta business in December added 1.7% growth on top. As Steve mentioned, we closed the acquisition of the majority of Ebro's Riviana brands in mid-December, which added about $12 million in revenue to the fourth quarter. Moving on to snacking and beverages, we posted strong growth of 8.1% on an organic basis in the fourth quarter, nearly all due to improved volume and mix. As we walk from left to right, the $19 million impact of the sale of the two ISP facilities is represented by the first orange bar. The second orange bar is the remainder of the carryover loss business and pricing adjustments, which totaled approximately $36 million in Q4. After taking these two items into account, our total retail channel sales as seen within the green box grew 8%. Here we grew 5% in the fourth quarter. And similar to the third quarter, we meaningfully outpaced our measured channel performance with growth of 14%. Finally, industrial and other grew 23% in the fourth quarter, while weakness in the food-away-from-home channel continued and was down 27%. On slide 14, you see our walk across of our key drivers to fourth quarter adjusted earnings per share of $1.07. Pricing, net of commodity costs or PNOC added $0.07, which was more than offset by $0.17 of COVID-19 related expenses that we absorbed in our adjusted P&L. The remaining operations impact of $0.14 was primarily driven by higher year-over-year operational costs from unfavorable manufacturing variances and expenses that were delayed from early in the year due to the COVID surge. Fourth quarter SG&A was unfavorable by $0.07 in the quarter due to higher variable incentive compensation related to our strong performance in 2020. As you think about the divisions in the context of their strategic objectives, you can see on slide 15 that growth within snacking and beverages, was driven by beverages and drink mixes, up 24%. New distribution on cookies, as well as retailer promotions around candy were the main drivers of 3% growth in sweet and savory in the quarter. Net debt finished the year at $1.9 billion and we delivered very strong free cash flow of $298 million in 2020 at the top of our guidance range. Our leverage at the end of the fourth quarter, net debt-to-EBITDA based on our bank covenant definition ended the year at 3.1 times. With regard to our capital structure so far this year, we have called $200 million of our 2024 notes. The total balance is $603 million and our intent is to address the remaining amount this year. In 2021, we are anticipating $100 million to $110 million in headwinds due to increased ingredient costs. That's an addition to increased employee cost driven by tight labor markets and rising freight costs. Turning now to our 2021 guidance on slide 18, our revenue guidance for the year is $4.4 billion to $4.6 billion. Our expectation for adjusted EBIT in 2021 is $290 million to $320 million. We anticipate adjusted EBITDA of $525 million to $570 million. That amount was approximately $26 million in 2020 to give you an idea of magnitude. Our interest expense guidance of $84 million to $90 million assumes that we refinanced at least $200 million of our 2024 notes this year and successfully lower our rate. Our adjusted effective tax rate is expected to be in the 24% to 25% range, which translate into adjusted earnings per share for the full year of $2.80 to $3.20. We anticipate free cash flow in 2021 to be approximately $300 million. Historically, this winning has been approximately 30% in the first half and 70% in the second half. We anticipate a similar cadence in 2021. We estimate that the revenue lift from pantry stocking in the first half of 2020 was $140 million to $150 million. We assume that the COVID expenses that we have been absorbing in the P&L each quarter will continue throughout 2021 in the range of $10 million to $12 million per quarter. So from a comparability standpoint, it's worth pointing out that the business contributed $22 million of 2020 first half revenue. I'll wrap up by saying that the top end of our full year guidance of $2.80 to $3.20 assumes the following. Our customer’s top 3 priorities are quality, cost and service and while breadth can be important in certain instances, we have seen that category depth is what customers truly value. We view categories representing 40% of our net sales as growth engines with strong consumer demand defined pockets of growth and existing debts with opportunities to go even further. Let's take broth for an example, in 2020 private label broth grew 27% and we gained almost 200 basis points of share. This is a great category and we win in broth because, one, it's on trend with strong consumer demand given its health conscious and protein rich attributes; two, private label share is high, nearly 40%; and three, we have strong capabilities, particularly around assortment, seasonal pricing and promotion and price gap management. Another 40% of our sales are in cash engines. These categories represent opportunities for us to harvest cash for reinvestment, balance sheet strength and capital return. In that vein, we bought back $25 million of stock in the fourth quarter or approximately 650,000 shares. In addition to delivering 1% to 2% of organic growth on the top line, we will pursue opportunities to drive additional growth through accretive M&A in focused categories. From a cash flow perspective, a combination of operating leverage, opex improvements from ongoing initiatives and synergies from acquisitions will fuel our continued strength and our ability to generate approximately $300 million in cash. And finally, we will ensure that translates into profitability, driving at least 10% adjusted earnings per share growth each year through a combination of acquisitions and enhanced for productivity synergies and share repurchase.

We delivered against all of our key metrics and outperformed on the top line at $1.18 billion, which includes Riviana. Fourth quarter adjusted EBITDA was $154 million and adjusted earnings per share totaled $1.07. On slide 14, you see our walk across of our key drivers to fourth quarter adjusted earnings per share of $1.07. That's an addition to increased employee cost driven by tight labor markets and rising freight costs. Our adjusted effective tax rate is expected to be in the 24% to 25% range, which translate into adjusted earnings per share for the full year of $2.80 to $3.20. We anticipate a similar cadence in 2021. I'll wrap up by saying that the top end of our full year guidance of $2.80 to $3.20 assumes the following. These categories represent opportunities for us to harvest cash for reinvestment, balance sheet strength and capital return.

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We delivered consolidated revenue of $371 million, down 32% compared to the prior year, excluding China and FX. Based on the information we have, for the second quarter, we expect Americas revenues to be between $265 million and $275 million with adjusted EBITDA margin improving sequentially from the first quarter. They include the latest in cutting edge digital signage and represent one of the largest exterior LED building displays in the U.S. delivering over 135,000 square feet of digital signage. With regard to our technology investments, we added 14 new digital billboards in the first quarter giving us a total of more than 1,400 digital billboards across the United States. Turning to our business in Europe, based on the information we have today, we expect second quarter segment revenues to be between $200 million and $220 million, excluding the impact of foreign exchange. Meanwhile, we are continuing to see promising signs in some of our other markets, particularly in the U.K., our second largest market, where the Phase 3 opening is well under way supported by a countrywide vaccination rate exceeding 50%. We added 355 digital displays in the first quarter for a total of over 16,500 screens now live. In the first quarter, consolidated revenue decreased to 32.7% to $371 million. Adjusting for foreign exchange revenue was down 34.8%. If you exclude China and adjust for foreign exchange, the decline in revenue was 31.7%. Consolidated net loss in the first quarter was $333 million compared to a consolidated net loss of $289 million in Q1 of 2020. Consolidated adjusted EBITDA was negative $33 million in Q1 of 2021 as compared to consolidated adjusted EBITDA of $51 million in Q1 of 2020. Excluding FX, consolidated adjusted EBITDA was negative $27 million in Q1 of 2021. The Americas segment revenue was $212 million in the first quarter of 2021, down 28.4% compared to the prior year with a decline in revenue across all of our products. National was down approximately 33% and local down approximately 25%. As I noted earlier, the Americas team delivered an exceptional quarter in Q1 of 2020 with 8.5% revenue growth over the prior year. Direct operating and SG&A expenses were down 21.1% due in part to lower site lease expenses, which declined 22.6% to $83 million related to lower revenue and renegotiated fixed site lease expense. Segment adjusted EBITDA was $64 million down 40.5% compared to the first quarter of last year with an adjusting EBITDA margin of approximately 30%. Transit was down 61.5% and airports decreased 62.4% to $20 million. Our billboard and other was down 20.7%. Rent continues to be a bit more resilient than digital and was down 19.1% with digital down 24.2% in the first quarter of 2020. And on to Slide 8, within transit, print declined 52.5% and digital was down 72.8%. Europe revenue of $150 million was down 29.4% and excluding foreign exchange, revenue was down 35.2% in the first quarter. Digital revenue was down 38.9%, excluding the impact of foreign exchange. Adjusted direct operating and SG&A expense were down 11.6% compared to the first quarter of last year, excluding the impact of foreign exchange, both direct operating expenses and SG&A expenses decreased in most countries in which we operate with the largest decrease occurring in France and U.K. and Sweden. The largest drivers of the decline in direct operating expenses was lower site lease expense has declined 10% to $93 million after adjusting for foreign exchange. Segment adjusted EBITDA was negative $62 [Phonetic] million after adjusting for foreign exchange. This compared to negative $14 million in Q1 of 2020. As discussed above, Europe and CCI B.V. revenue decreased $62 million during the first quarter of 2021 compared to the same period of 2020 to $150 million. After adjusting for a $12 million impact from movement in foreign exchange rates, Europe and CCI B.V. revenue decreased $75 million. CCI B.V. operating loss was $100 million in the first quarter of 2021 compared to $46 million in the same period of 2020. Latin American revenue was $10 million in the first quarter, down $9 million compared to the same period last year due the impact of COVID-19. Direct operating expense and SG&A from our Latin American business were $13 million, down $3 million compared to the first quarter in the prior year due in part to lower revenue and cost savings initiatives. Latin America adjusted EBITDA was a negative $4 million. Capital expenditures totaled $18 million in the first quarter, a decline of $18 million compared to the prior year period as we continue to focus on preserving liquidity given the current operating conditions. On to Slide 12, Clear Channel Outdoor's consolidated cash and cash equivalents totaled $642 million as of March 31st, 2021. Our debt was $5.6 billion, up slightly due to the refinancing of the senior notes and cash paid for interest on the debt was $145 million during the first quarter. Our weighted average cost of debt was 5.9% as of March 31st, 2021. We expect this plan to be substantially complete by the end of the first quarter of 2023, an estimate that total charges for the Europe portion of the international restructuring plan, including $10 million of charges already incurred will be in a range of approximately $51 million to $56 million. We expect a Europe portion of the plan to result in a pre-tax annual cost savings in excess of $28 million. Additionally, we continue to work on negotiating six site lease savings and have achieved $23 million in rent abatements in the first quarter on a consolidated basis. Also, we received European governmental support and wage subsidies in response to COVID-19 of $5 million in the first quarter. Moving on to our financial flexibility initiatives as previously announced, we successfully completed an offering of $1 billion of 7.75% senior notes due 2028. We use the net proceeds from the offering to redeem $940 million of our 9.25% senior notes due 2024. For the second quarter of 2021, Americas' segment revenue is expected to be in the range of $265 million to $275 million and adjusted EBITDA margin is expected to improve sequentially over the first quarter of 2021. While our Europe segment revenue is expected to be in the range of $200 million to $220 million, excluding the impact of foreign exchange. Additionally, we expect cash interest payments of $216 million in the last nine months of 2021 and $334 million throughout 2022. We expect consolidated capital expenditures to be in the $155 million to $165 million range in 2021. We anticipate our consolidated revenue in the second half of 2021 to reach nearly 90% of 2019 levels excluding China. Lastly, we expect ending liquidity for 2021, including unrestricted cash and availability under the company's revolving credit facilities to be approximately $425 million to $475 million, but that could vary based on timing of cash receipts, and our payments.

Based on the information we have, for the second quarter, we expect Americas revenues to be between $265 million and $275 million with adjusted EBITDA margin improving sequentially from the first quarter. Turning to our business in Europe, based on the information we have today, we expect second quarter segment revenues to be between $200 million and $220 million, excluding the impact of foreign exchange. For the second quarter of 2021, Americas' segment revenue is expected to be in the range of $265 million to $275 million and adjusted EBITDA margin is expected to improve sequentially over the first quarter of 2021. While our Europe segment revenue is expected to be in the range of $200 million to $220 million, excluding the impact of foreign exchange.

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About 90% of our net sales are generated by proprietary products, and over three quarters of our net sales come from products for which we believe we are the sole source provider. In our business, we saw another quarter of sequential improvement in commercial aftermarket revenues with total commercial aftermarket revenues up 14% over Q3. We had strong operating cash flow generation of almost 300 million and closed the quarter with approximately 4.8 billion of cash. However, based on the quite limited due diligence information that was made available and the resulting uncertainties, we could not conclude that moving forward with an offer of 900 pence per Meggitt share would meet our long-standing goals for value creation and investor returns. These additional diligence requests were very similar to what was typically received in the almost 90 acquisitions we have done over the life of the company. Given what we know today, our teams are planning for our commercial aftermarket revenue to grow in the 20 to 30% range, planning for our commercial aftermarket revenue to grow in the 20 to 30% range. We expect full year fiscal 2022 EBITDA margins to be roughly in the area of 47%, which could be higher or lower based on the rate of commercial aftermarket recovery. As a final note, this margin guidance includes the unfavorable headwind of our recent Cobham acquisition of about 0.5%. As a reminder, and consistent with past years, with roughly 10% less working days than the subsequent quarters, fiscal year 2022 Q1 revenues, EBITDA, EBITDA margins are anticipated to be lower than the other three quarters of fiscal year 2022. In the commercial market, which typically makes up close to 65% of our revenue, we will split our discussion into OEM and aftermarket. Our total commercial OEM revenue increased approximately 1% in Q4 and declined approximately 25% for full year fiscal 2021 compared with prior year periods. Sequentially, both Q4 revenue and bookings improved approximately 5% compared to Q3. Total commercial aftermarket revenue increased by approximately 41% in Q4 and declined approximately 18% for full year fiscal 2021 when compared with prior year periods. Sequentially, total commercial aftermarket revenues grew approximately 14%, and bookings grew more than 25%. IATA recently forecast a 39% decrease in revenue passenger miles in calendar year 2022 compared to pre-pandemic levels. Within IATA's estimate is the expectation that domestic travel will be back to 93% of pre-pandemic levels in calendar year 2022. Now let me speak about our defense market, which traditionally is at or below 35% of our total revenue. The defense market revenue, which includes both OEM and aftermarket revenues, grew by approximately 2% in Q4 and approximately 5% from full year fiscal 2020 when compared with prior year periods. First, in regard to profitability for fiscal '21, EBITDA as defined of about 636 million for Q4 was up 28% versus prior year Q4. On a full year basis, EBITDA as defined was about 2.19 billion, down 4% from the prior year. EBITDA as defined margin in the quarter was approximately 49.7%. This represents sequential improvement in our EBITDA as defined margin of almost 400 basis points versus Q3 of '21. As a result of the accounting treatment applied, roughly 130 million of revenue and 25 to 30 million of EBITDA as defined from these divested operating units remains in our FY '21 results. This revenue and EBITDA will obviously not carry over into FY '22. On cash and liquidity, we ended the year with approximately 4.8 billion of cash on the balance sheet, and our net debt-to-EBITDA ratio was seven times. In the early days of October, we repaid the 200 million revolver drawdown that we made at the onset of COVID back in April of 2020. Pro forma for the revolver paydown, our cash balance is 4.6 billion. Interest expense is expected to be about 1.08 billion in FY '22. On taxes, our fiscal '22 GAAP and cash rates are anticipated to be in the range of 21 to 24%, and the adjusted tax rate will be a few points higher and in the range of 26 to 28%. On the share count, we expect our weighted average shares outstanding will increase by about 800,000 shares to 59.2 million in FY '22, and that assumes no buybacks occur during the fiscal year. As we traditionally define our free cash flow from operations at TransDigm, which as a reminder is our EBITDA as defined less debt interest payments, less capex, less cash taxes, we expect this metric to be in the 1 billion area, maybe a little better, in fiscal '22.

This revenue and EBITDA will obviously not carry over into FY '22.

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As more and more companies embrace compressed transformation, our clients are turning to us as their trusted partner as reflected in our outstanding growth of 27% this quarter. We added 15 new Diamond clients, bringing the total to 244. Diamond clients are our largest relationships and to give some context, we added 13 Diamonds in all of FY'21. We also had record bookings of $16.8 billion, 30% growth year-over-year with 20 clients with bookings over $100 million, and we expanded operating margin 20 basis points in Q1, with adjusted earnings per share growth of 28%, while we continue to invest in our business and people, including $1.7 billion in acquisitions and in just the first quarter, we invested $215 million in learning for our people with 8.6 million training hours for approximately 14 hours per person. And when the pandemic hit, we were ready with capabilities at scale reflected in 70% of our revenue at that time, being from digital cloud and security with strong relationships with the world's leading technology companies, which in some cases go back decades, with the focus on growing our people through learning, allowing us to rapidly reskill with an unwavering commitment to inclusion and diversity and the quality and caring for our people professionally and personally, making us a talent magnet in a tight labor market, adding 50,000 talented individuals in Q1. And it is our breadth of capabilities across strategy and consulting, interactive technology and operations which is unique in our industry that allows us to work side-by-side with our clients to deliver results, and we believe our goal to create 360 degree value for our clients, people, shareholders, partners and communities is an essential part of our success. I want to congratulate our 1,030 new promotes to Managing Director, 143 new appointments to Senior Managing Directors, and the more than 90,000 people we promoted around the world in Q1, overall. Today, we launched our 360 Value Reporting Experience, a new way to show our progress and the value we create in all directions for all of our stakeholders. We were very pleased with our overall results in the first quarter, which exceeded our expectations, setting a new bookings record at $16.8 billion with consulting bookings exceeding the previous record by more than $1 billion. Revenues grew 27% in local currency, increasing more than $3.2 billion over Q1 last year and more than $600 million above our guided range, with broad-based over delivery across all markets, services and industries, with all 13 industry groups growing double-digits. We continue to extend our leadership position with growth we estimate to be more than 5 times the market, which refers to our basket of publicly traded companies. Operating margin of 16.3% for the quarter, an increase -- with an increase of 20 basis points. We delivered very strong earnings per share of $2.78, up 20% over adjusted fiscal '21 results. Finally, we delivered free cash flow of $349 million and returned $1.5 billion to shareholders through repurchases and dividends. We also invested approximately $1.7 billion in acquisitions and we continue to expect to invest approximately $4 billion in acquisitions this fiscal year. New bookings were a record at $16.8 billion for the quarter, representing 30% growth in U.S. dollars and were $800 million higher than our previous record, with an overall book-to-bill of 1.1. Consulting bookings were a record at $9.4 billion with a book-to-bill of 1.1. Outsourcing bookings were $7.4 billion with a book-to-bill of 1.1. We were very pleased with our bookings this quarter, which reflected 20 clients with bookings over $100 million. Revenues for the quarter were $15 billion, a 27% increase in U.S. dollars and in local currency. Consulting revenues for the quarter were $8.4 billion, up 33% in U.S. dollars and 32% in local currency. Outsourcing revenues were $6.6 billion, up 21% in U.S. dollars and in local currency. In North America, revenue growth was 26% in local currency, driven by double-digit growth in public service, software and platforms and consumer goods, retail and travel services. In Europe, revenues grew 28% in local currency, led by double-digit growth in consumer goods, retail and travel services, industrial and banking and capital markets. In growth market, we delivered 30% revenue growth in local currency, driven by double-digit growth in consumer goods, retail and travel services, banking and capital markets and public service. Gross margin for the quarter was 32.9%, compared with 33.1% for the same period last year. Sales and marketing expense for the quarter was 9.7%, compared with 10.4% for the first quarter last year. General and administrative expenses were 6.9%, compared to 6.6% for the same quarter last year. Operating income was $2.4 billion in the first quarter, reflecting a 16.3% operating margin, up 20 basis points compared with Q1 last year. Before I continue, as a reminder, we recognized an investment gain in Q1 last year, which impacted our tax rate and increased earnings per share by $0.15. Our effective tax rate for the quarter was 24.4%, compared with an adjusted effective tax rate of 23.7% for the first quarter last year. Diluted earnings per share were $2.78, compared with adjusted diluted earnings per share of $2.17 in the first quarter last year. Days service outstanding were 42 days compared to 38 days last quarter and 38 days in the first quarter of last year. Free cash flow for the quarter was $349 million, resulting from cash generated by operating activities of $531 million net of property and equipment additions of $182 million. Our cash balance at November 30th was $5.6 billion, compared with $8.2 billion at August 31st. In the first quarter, we repurchased or redeemed 2.4 million shares for $845 million at an average price of $346.19 per share. At November 30th, we had approximately $5.6 billion of share repurchase authority remaining. Also in November, we paid a quarterly cash dividend of $0.97 per share for a total of $613 million. This represents a 10% increase over last year. And our Board of Directors declared a quarterly cash dividend of $0.97 per share to be paid on February 15th, a 10% increase over last year. More companies are embracing compressed transformation, underpinned by cloud and digital and are moving to build their digital core and use technology to transform how they operate and to find new ways to compete and grow as you would expect for 27% revenue growth. We created a state-of-the-art systems to track inventory, sales, warranty information and returns all in the cloud, all in real time, and have already helped to increase customer satisfaction 35% with improved cost optimization and increased revenue up next. It will help reduce operating cost by up to 40%, accelerate time to market and free up resources for energy transition and innovations like smart metering, helping customers make environmentally conscious decisions and energy providers stay responsive and reliable. I'm pleased to announce that we have signed an agreement to acquire Zestgroup, a Dutch sustainability services company with a 140 employees that specializes in energy transition services and sourcing renewables and other clean energy sources. We are proud to have the largest enterprise Medivirs [Phonetic] through what we call the nth four and are deploying over 60,000 virtual reality headsets and have created one Accenture Park, a virtual campus for on-boarding and immersive learning, including meeting rooms and collaborative experiences. Many of these client examples reflect our goal to create 360 degree value. And today we are proud to present our new 360 Degree Value Reporting Experience, a new way to share our progress, which is available on our website. We've expanded our ESG reporting with three additional ESG framework, the Sustainability Accounting Standards Board SASB, the task force on climate related financial disclosure TCFD, and the World Economic Forum International Business Council WEF, IBC metrics, while continuing to report against the Global Reporting Initiative GRI standards, the UNGC 10 principles and the Carbon Disclosure Project CDP, because we believe the transparency builds trust and helps us all make more progress. For the second quarter of fiscal '22, we expect revenues to be in the range of $14.3 billion to $14.75 billion. This assumes the impact of FX will be about negative 4% compared to the second quarter of fiscal '21 and reflects an estimated 22% to 26% growth in local currencies. For the full fiscal year '22 based on how the rates have been trending over the last few weeks, we now expect the impact of FX on our results in U.S. dollars will be approximately negative 3% compared to fiscal '21. For the full fiscal '22, we now expect our revenue to be in the range of 19% to 22% growth in local currency over fiscal '21, which continues to assume an inorganic contribution of 5%. For operating margin, we continue to expect fiscal year '22 to be 15.2% to 15.4%, a 10 basis point to 30 basis point expansion over fiscal '21 results. We continue to expect our annual effective tax rate to be in the range of 23% to 25%. This compares to an adjusted effective tax rate of 23.1% in fiscal '21. For earnings per share, we now expect our full year diluted earnings per share for fiscal '22 to be in the range of $10.33 to $10.60 or 17% to 20% growth over adjusted fiscal '21 results. For the full fiscal '22, we now expect operating -- operating cash flow to be in the range of $8.4 billion to $8.9 billion, property and equipment additions to be approximately $700 million and free cash flow to be in the range of $7.7 billion to $8.2 billion. Our free cash flow guidance continues to reflect a very strong free cash flow to net income ratio of 1.1 to 1.2. Finally, we continue to expect to return at least $6.3 billion through dividends and share repurchases as we remain committed to returning a substantial portion of cash to our shareholders.

We delivered very strong earnings per share of $2.78, up 20% over adjusted fiscal '21 results. Revenues for the quarter were $15 billion, a 27% increase in U.S. dollars and in local currency. Diluted earnings per share were $2.78, compared with adjusted diluted earnings per share of $2.17 in the first quarter last year.

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Yesterday, we reported fiscal '22 first quarter net income of $249 million, a $1.86 per diluted share. Consolidated operating income decreased to $276 million in the first quarter, primarily due to a $39 million decrease in revenues associated with the refund of excess deferred tax liabilities. Excluding the impact of these excess deferred tax liability refunds, operating income increased $16 million over the prior-year quarter. Rate increases in both of our operating segments, driven by increased safety reliability capital spending totaled $47 million. Continued robust customer growth and our distribution segment increase operating income by $4 million. In the 12 months ended December 31st, we added 55,000 new customers, which represents a 1.7% increase. These increases are partially offset by a $20 million increase in consolidated O&M expense. Consolidated capital spending increased to $684 million, a $227 million period-over-period increase reflecting an increased system of modernization spending in our distribution segment. Spending to close out Phase 1 of APT's Line X and Line X2 projects and project timing. We remain on track to spend $2.4 billion to $2.5 billion of capital expenditures this fiscal year with more than 80% of the spending focused on modernizing the distribution and transmission network, which also reduces methane emissions. To date, we have implemented $73 million in annualized regulatory outcomes excluding refunds of excess deferred tax liabilities. And currently, we have about $36 million in progress. Slides 17 through 24 summarize these outcomes. To date, we have completed over $1 billion of long-term financing. Following the completion of the $600 million 30-year senior note issuance in October, we executed four sales rates under our ATM program for approximately 2.7 million shares for $260 million, and we settled forward agreements on 2.7 million shares or approximately $262 million. As of December 31st, we were probably $295 million in net proceeds available under existing forward sale agreements. As a result of this financing activity, direct recapitalization excluding the $2.2 billion of winter storm financing, was 59% as of December 31st. Additionally, we finished the quarter with approximately $3.1 billion of liquidity. In January, we completed the issuance of $200 million of long-term debt through [Inaudible] our existing 10-year 2.625% notes due September 2029. The net proceeds were used to pay off or $200 million term loan that was scheduled to mature in April. Following this offering, excluding the interim winter storm financing, a weighted average cost of debt decreased to 3.81% and our weighted average maturity increased 19.23 years, which further strengthens our financial profile. Additional details for financing activities or equity forward arrangements, as well as our financial profile, can be found on Slides 7 through 10. Yesterday, the Texas Railroad Commission unanimously issued a financing order authorizing the Texas Public Financing Authority to issue custom rate relief bonds to securitize costs associated with winter storm Uri over a period not to exceed 30 years. Upon receipt of the securitization funds, we will repay the $2.2 billion of winter storm financing we issued last March. Our first quarter performance was a solid start in the fiscal year, the execution of our operational, financial, regulatory plans is on track, which positions us well to achieve our fiscal '22 earnings per share guidance of $5.40 to $5.60. Details around our guidance can be found in Slides 12 and 13. It is through your dedication, your focus, and the effort that we safely provide natural gas sales to 3.2 million customers in 1,400 communities across our eight states. The results, Chris summarized, reflect the commitment of all 4,700 Atmos Energy employees as we work together to continue modernizing our natural gas distribution, transmission, and storage systems on our journey to be the safest provider of natural gas services. For example, at APT, we placed into service Phase 1 of a 2-phase pipeline integrity project that will replace 125 miles of Line X. As a reminder, Line X runs from Waha to Dallas and is key to providing reliable service to the local distribution companies behind the APT system. Phase 1 replaced 63 miles of 36-inch pipeline. Phase 2 includes an additional 62 miles of 36-inch pipeline and is anticipated to be completed late this calendar year. Phase 1 replaces 21 miles of this line and Phase 2 will replace an additional 18 miles and is expected to be completed late this calendar year. Phase 3, which will replace the remaining 52 miles is expected to be in service in 2023. During the completion of Phase 1 for Line X and Phase 1 for Line S2 our teams used recompression practices to avoid venting or flaring over 70,000 metric tons of carbon dioxide equivalent. APT's third salt-dome cavern project at Bethel is now approximately 80% complete and remains on track to be placed in service late this calendar year. In addition to those system modernization projects, we continue to make progress in advancing our comprehensive environmental strategy that is focused on reducing Scope 1, 2, and 3 emissions and reducing our environmental impact from our operations in the following five key areas, operations, fleet, facility, gas supply, and customers. We currently transport approximately eight Bcf a year and anticipate another four projects to come online within the next 12 to 18 months. Furthermore, we are evaluating approximately 20 opportunities that could further expand our RNG transportation. And finally, over the next five years, we will invest $13 billion to $14 billion in capital support, the replacement of 5,000 to 6,000 miles of our distribution transmission pipe, or about 6% to 8% of our total system. We will also replace 100 to 150 steel service lines, which is expected to reduce our inventory by approximately 20%. This level of replacement work is expected to reduce methane emissions from our system by 15% to 20% over the next five years.

Yesterday, we reported fiscal '22 first quarter net income of $249 million, a $1.86 per diluted share.

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We did generate positive EBITDA of $244 million per quarter, about the same as the first quarter. Singapore remains in the $500 million to $600 million range annually, although the second quarter was impacted by heightened pandemic-related restrictions for a portion of the quarter. We will also be subject to closures of both portions of MBS from today through August 5 as part of COVID-19-related protocols. You may want to reference Pages 29 and 30 in your deck. We are confident we'll return to a $5 billion plus EBITDA from Asia in the future.

We did generate positive EBITDA of $244 million per quarter, about the same as the first quarter.

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This being said, our Q2 record numbers: revenue of 5 billion; net income of 795 million; and adjusted EBITDA of 1.4 billion, should not be our all-time records for long. Drilling down specifically on our adjusted EBITDA, the 1.4 billion performance represented a 165% increase over the past quarter, primarily due to increased steel pricing fixed-price contract improvements, favorable product mix, and higher volumes. In the Steelmaking segment, we sold 4.2 million net tons of steel products, which included 33% hot-rolled, 17% cold rolled, and 30% coated, with the remaining 20% consisting of stainless, electrical, plate, slab, and rail. Direct automotive shipments were about 1.2 million tons during the quarter, about 300,000 tons less than what we anticipated back in March. This contributed to an inventory build of about $300 million during Q2, which, along with rising receivables due to rising prices, produced another working capital build during the second quarter. We expect to generate 1.4 billion in cash from our expected 1.8 billion in adjusted EBITDA for the third quarter. Furthermore, we are increasing our full-year adjusted EBITDA guidance to $5.5 billion. In the second quarter, we made open market bond repurchases and completely redeemed the remaining 400 million of our 2025 unsecured notes, the only bond we had that was callable this year. And we have already repaid another 455 million in debt during just the first 20 days of July. Our revenue line increased by $1 billion and our cost of goods sold increased by just $100 million. earlier this month, we instituted a companywide vaccination bonus program that offers a cash bonus of $1,500 to each vaccinated employee if the level of vaccination of their working sites achieved 75%. If the level of vaccination of the site achieves 85%, the cash bonus paid to each employee of the site doubles to $3,000. And some of the locations are already at the first threshold, with two locations already at a second threshold of 85%. 7 is the largest blast furnace in North America, and for reference, produced 33% more hot metal per day than our two blast furnaces at Cleveland works combined. And thus far in July, we are producing at a 2.1 million tons annualized rate, well above nameplate of 1.9 million tons per year. Along with the productivity benefits, this action alone reduced our implied carbon emissions by 163,000 tons during the quarter. Natural gas composition is 95% CH4, methane, and 4% C2H6, ethane. Also, our direct reduction plant uses 100% of natural gas as a reduction. The total amount of natural gas, we currently use in our eight blast furnaces and in our direct reduction plant eliminates the need for 1.5 million tons of coke per year, the equivalent of two coke batteries. Actually, our direct reduction plant was designed and built to be able to use up to 70% hydrogen. In reality, even here in the United States, soon to achieve 75 participation of EAFs, we may be near a peak, particularly in further investments in direct reduction are not made.

We expect to generate 1.4 billion in cash from our expected 1.8 billion in adjusted EBITDA for the third quarter.

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In our financial guaranty business, Assured Guaranty is having our best year for direct new business production in more than a decade based on direct PVP results since 2009 for both the third quarter and first nine months of 2020. And our Board of Directors has authorized additional share repurchases of $250 million. Also on October 1st, S&P Dow Jones Indices announced that Assured Guaranty would become a component stock of the S&P SmallCap 600 index on October 7th. Presumably, because index funds and ETFs attract the S&P 600, as well as actively managed funds benchmark to the index began accumulating positions in our shares. KBW estimated that has the funds that track the S&P 600 will need to purchase 8.7 million shares. There are more than 2000 funds in the SmallCap investment category. Turning to U.S. product public finance production, we wrote $93 million of PVP in the third quarter, more than double our third quarter 2019 PVP and an 11 year record. In terms of insured par sold, we continue to lead the industry guaranteeing 64% of the $11.9 billion of primary market insured par sold in the third quarter, which was the industry's highest quarterly insured par amount since mid-2009 and 82% higher than in last year's third quarter. Bond insurance penetration reached 8.3%, up from last year's third quarter penetration of 5.7%. The 7.7% penetration for the first three quarter, municipal bond insurance industry is likely to see its best annual market penetration in the insured par volume in over a decade and this is still in a very low interest rate environment. We benefited from credit spreads that are wired than at the beginning of the year, but this is still a market where AAA benchmark yields have been below 2% almost all year. Driven by the heightened demand for insurance, combined with a 35 [Phonetic] year-over-year increase in quarterly issuance, Assured Guaranty's third quarter originations totaled $7.5 billion of primary market par sold, essentially double the amount during the third quarter of 2019. One of the new issues sold with our insurance in the third quarter was Assured Guaranty's largest U.S. public finance transactions since 2009, a $726 million of insured par for the Yankee Stadium project. It refunded $335 million of our previous exposure, so our net exposure to this credit increased by $391 million. This is one of 19 new issues that utilize $100 million or more of our insurance during the third quarter. For the first nine months, we provided insurance on $100 million or more of par on 32 individuals issued -- individual new issues, more than in any full year over the past decade. Actual issuance represented approximately 30% of the muni market's total new issue par volume during the first nine months of 2020 compared with 5% to 10% in recent years. And 35% of our par insured on new issues sold in the period was taxable. During those nine months, the par amount we insured on taxable new issues totaled $5.5 billion compared with $1.5 billion in the first nine months of 2019. In case of credits with underlying S&P or Moody's ratings in the AA category, we insured a total of $806 million of par for the quarter and during the first nine months more than $2 billion of par. Year-to-date through September, we provided insurance on $15.7 billion municipal new issue par sold, of which $1 billion -- which is $1 billion more than in all of 2019. Combining primary and secondary market activity for the first nine months, we guaranteed $16.6 billion of municipal par, $6.2 billion more than in the same period last year, a 60% increase. In international infrastructure finance, we completed the best third quarter origination since 2009's acquisition of AGM, producing $24 million of PVP, 52% more than in last year's third quarter. The recently announced release of $13 billion in federal assistance helped to improve the conditions for reaching such an agreement. Assured Investment Management currently manages $1 billion of our insured companies investable assets. In terms of capital management, year-to-date at September 30th, we have already repurchased 11.4 million shares, which is well over our initial plan of approximately 10 million shares. As for our third quarter 2020 results, adjusted operating income was $48 million or $0.58 per share. This consists primarily of $81 million of income from our Insurance segment, a $12 million loss from our Asset Management segment and a $18 million loss from our Corporate division which -- where we reflect our holding company interest expense as well as other corporate income and expense items. Starting with the Insurance segment, adjusted operating income was $81 million compared to $107 million in the third quarter 2019. This includes net earned premiums and credit derivative revenues of $113 million compared with the $129 million in the third quarter of 2019. In total, accelerations of net earned premiums were $18 million in the third quarter 2020 compared with $38 million in the third quarter of 2019. Net investment income for the Insurance segment was $75 million compared with $89 million in the third quarter of 2019, which do not include mark-to-market gains related to our Assured Investment Management funds and other alternative investments. As of September 30, 2020, the insurance companies have authorization to invest up to $500 million in funds managed by Assured Investment Management, of which over $350 million had been deployed. The change in fair value of our investments in Assured Investment Management funds was a $13 million gain in the third quarter 2020 across all strategies. These gains were recorded in equity and earnings of investees, along with an additional $7 million gain on other non-Assured Investment Management alternative investments with a carrying value of almost $100 million. This compared to only $1 million in fair value gains in the third quarter of 2019. Loss expense in the Insurance segment was $76 million in the third quarter 2020 and was primarily related to economic loss development on certain Puerto Rico exposures. In the third quarter of 2019, loss expense was $37 million also primarily related to Puerto Rico exposures, but was partially offset by a benefit in the U.S. RMBS transactions. The net economic development in the third quarter 2020 was $70 million, which mostly consisted of $56 million in loss development for the U.S. public finance sector principally Puerto Rico exposures. The Asset Management segment adjusted operating income was a loss of $12 million. Additionally, price volatility and down grades have triggered over-collateralization provisions in CLO transactions that resulted in the third quarter 2020 management fee deferrals of approximately $3 million. Adjusted operating loss for the Corporate division was $18 million for the third quarter of 2020 compared with $28 million for the third quarter of 2019. It also includes Board of Directors and other corporate expenses and in the third quarter of 2020, it also include a $12 million benefit in connection with the separation of the former Chief Investment Officer and Head of Asset Management from the company. From a liquidity standpoint, the holding company currently have cash and investment available for liquidity needs and capital management activities of approximately $82 million, of which $20 million reside AGL. In the third quarter 2020, the effective tax rate was a benefit of 32.7% compared with a provision of 16.3% in the third quarter 2019. The tax benefit in the third quarter of 2020 was primarily due to a $17 million release of reserves for uncertain tax positions upon the closing of the 2016 audit year. Turning to our capital management strategy, in the third quarter of 2020, we repurchased 1.9 million shares for $40 million for an average price of $20.72 per share. Since the end of the quarter, we have purchased an additional 1.7 million shares for $46 million, bringing our year-to-date share repurchases as of today to over 13 million shares. Since January 2013 our successful capital management program has returned $3.6 billion to shareholders, resulting in a 61% reduction in total shares outstanding. The cumulative effect of these repurchases was a benefit of approximately $25.43 per share in adjusted operating shareholders' equity and approximately $45.48 in adjusted book value per share, which helped drive these important metrics to new record highs of $73.80 in adjusted operating shareholders' equity per share and over $108 million of adjusted book value per share.

As for our third quarter 2020 results, adjusted operating income was $48 million or $0.58 per share.

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1 takeaway from today's call is the upside we are seeing on the long-run earnings potential of this business. At a high level, total net revenue for the third quarter increased 80% year over year to 856 million, with 39% coming from the Topgolf segment, 34% from golf equipment, and 27% from apparel, gear, and other. Profitability also increased with adjusted EBITDA up 57% to 139 million. but is now just a portion of our business, just under 40% of this year's estimated full year revenues. I'm pleased to report that our owned venues continued their positive trends with Q3 same venue sales at approximately 100% of 2019 levels. In addition, we're seeing very strong flow-through to the bottom line with adjusted EBITDA of 59 million for the quarter, which significantly outpaced our forecast. And we now anticipate low to mid-90 same venue sales rates for both Q4 and the full year, up nicely from our prior forecast. We now also have a strong visibility into the 2022 development pipeline and are confident that we can hit our target of 10 new venues next year. Now for the full year, we anticipate that our total new bay installs will be approximately 10% below our 8,000 bay target. Most importantly, though, demand for Toptracer remains very strong as is customer feedback with driver ranges reporting 25 to 60% revenue increases post installation. We are confident that in a normal operating environment, we will be able to get back to our goal of 8,000-plus installations per year. Hardgoods retail sell-through has continued to trend higher according to Golf Datatech, with Q3 up 1.3% year over year, and up 46.5% compared to 2019. comp store sales for the quarter were very strong, up 84% versus 2020, and 50% versus 2019. During the quarter, we opened two new Travis stores in Florida, one in Boca and the other in Palm Gardens, ending the quarter with a total of 26 retail locations. We expect to open another three doors in Q4 for a total of 29 doors by year-end. E-commerce was also a strong driver of growth with normalized sales up 50% year over year. The fabric blends in this collection use at least 98% organic cotton and at least 62% recycled polyester created from plastic bottles, with 100% of the profits going to the Surfrider Foundation, an organization dedicated to protecting the world's oceans and beaches. Jack Wolfskin experienced a strong Q3 as well, with 2022 spring/summer pre-books up significantly over 2020 and comp store sales increasing almost 10% over both 2019 and 2020. 1 position year to date. Moving to Slides 12 and 13. Consolidated net revenue for the quarter was $856 million, an increase of 80% or $381 million compared to Q3 2020. The increase was led by the addition of Topgolf revenue of $334 million, along with an 8.4% increase in golf equipment revenue and an 11.9% increase in apparel, gear, and other. Changes in foreign currency rates had a $4 million favorable impact on third quarter 2021 revenues. Total cost and expenses were $772 million on a non-GAAP basis in the third quarter of 2021, compared to $406 million in the third quarter of 2020. Of the 366 million increase, Topgolf added $310 million of total costs and expenses. The remaining $56 million increase includes moving spending levels back to normal levels, the start-up of the new Korean Callaway apparel business and expansion of the TravisMathew business, increase corporate structure -- increase corporate costs to support a larger organization, and increase freight costs and inflationary pressures. We are also reporting for the third quarter of 2021, non-GAAP operating income of $85 million, a $15 million increase over the same period in 2020. The increase was led by a $24 million increase in segment profit due to the addition of the Topgolf business, and a $9 million increase in apparel, gear, and other operating income, partially offset by $11 million decrease in golf equipment operating income due to increased freight costs and return to more normalized spend. Non-GAAP other expense was $22 million in the third quarter compared to other expense of 3 million in Q3 2020. The $19 million increase was primarily related to a $16 million increase in interest expense related to the addition of Topgolf, as well as lower hedge gains, compared to the prior period. On a GAAP basis, the effective tax rate for the third quarter was an unusual 132%. On a nine-month GAAP basis, the effective tax rate was 22%. Excluding the valuation allowance we recorded again and the impact of the other nonrecurring items, our non-GAAP effective tax rate for the third quarter was 58% and for the nine months was 29%. Non-GAAP earnings per share was $0.14 or an approximately 194 million shares in the third quarter of 2021, compared to $0.61 per share on approximately 97 million shares in the third quarter of 2020. Full year estimated diluted shares is approximately 177 million shares, which includes the weighted average shares issued in connection with the merger over approximately a 10-month period. Lastly, adjusted EBITDA was $139 million in the third quarter of 2021, compared to $88 million in the third quarter of 2020. The $51 million increase was driven by a $59 million contribution for the Topgolf business, which performed exceptionally well this quarter and was partially offset by a return toward more normal spend levels in the golf equipment and soft goods businesses. As of September 30, 2021, available liquidity, which is comprised of cash on hand and availability under our credit facilities was $918 million, compared to $630 million at September 30, 2020. At quarter end, we had a total net debt of $1 billion, including deemed landlord financing of $311 million related to the financing of Topgolf venues. Our leverage ratios have improved significantly period over period and on a net debt basis is now 2.5 times, compared to 3.5 times at September 30, 2020. Consolidated net accounts receivable was $255 million, an increase of 6%, compared to $240 million at the end of the third quarter of 2020. This increase is primarily attributable to the increase in third quarter revenue, as well as an incremental $10 million of Topgolf accounts receivable. Legacy days sales outstanding decreased to 53 days as of September 30, 2021, compared to 55 days as of September 30, 2020. Our inventory balance increased to $385 million at the end of the third quarter of 2021, compared to $325 million at the end of the third quarter of the prior year. This $60 million increase was due to higher golf equipment inventory, especially toward the end of the quarter, reflecting an increase in in-transit inventory and a shift to making '22 launch product. The Topgolf business also added $18 million to total inventory this quarter. Capital expenditures for the first nine months of 2021 were $149 million, net of expected REIT reimbursements. This includes $109 million related to Topgolf. From a full year 2021 forecast perspective, the golf equipment and soft goods business forecast is $60 million. The 2021 full year forecast for Callaway and Topgolf is approximately $225 million, net of REIT reimbursements, primarily related to the new venue openings. The foregoing amounts do not include approximately 33 million in capital expenditures for Topgolf in January and February, which was premerger. Non-GAAP depreciation and amortization expense was $37 million in the third quarter of 2021, compared to $8 million in 2020. This includes $28 million of non-GAAP depreciation and amortization related to Topgolf. For the full year 2021, we expect non-GAAP depreciation and amortization expense to be approximately $130 million, which includes $93 million for the Topgolf business. The foregoing does not include approximately 18 million of Topgolf non-GAAP depreciation and amortization from January and February in the aggregate. For the full year, we expect revenue to range between 3.11 and $3.12 billion. That compares to 1.59 billion in 2020 and 1.70 billion in 2019. It also assumes continued strong momentum in the Topgolf business, which is expected to generate 10-month segment revenue that will come in slightly above its 2019 full 12-month revenue of $1.06 billion. Full year adjusted EBITDA is projected to be between 424 and $430 million, which assumes approximately 158 million from Topgolf. For the fourth quarter, our implied revenue guidance is increasing by approximately 30 million, with about 50% of that flowing through to adjusted EBITDA.

Consolidated net revenue for the quarter was $856 million, an increase of 80% or $381 million compared to Q3 2020. Non-GAAP earnings per share was $0.14 or an approximately 194 million shares in the third quarter of 2021, compared to $0.61 per share on approximately 97 million shares in the third quarter of 2020.

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First, we continue taking share in the global contact lens market, with CooperVision being flat for calendar Q3 against the market being down 3%. Third, our myopia management portfolio comprised of MiSight and Ortho K lenses performed extremely well, including MiSight being up 73%. Moving to the numbers and reporting all percentages on a constant-currency basis, we posted consolidated revenues of $682 million in Q4, with CooperVision revenues of $506 million, down 3%; and CooperSurgical revenues of $175 million, down 4%. Non-GAAP earnings per share were $3.16. For CooperVision, the Americas were up 3%, led by strength in MyDay and Biofinity and some rebound in channel inventory of roughly $10 million. EMEA was down 6%, which included quarter-end purchasing delays from several large accounts as the region returned to more restrictive COVID-related lockdowns in October. Asia Pac was down 8% with COVID-related softness lingering longer into the quarter than we were expecting. Our silicone hydrogel dailies were up 1% in Q4, led by strength in torics and a strong rebound in MyDay sphere sales. Given there still exists roughly $2.4 billion in traditional daily hydrogel sales worldwide, there's a significant multiyear trade-up opportunity for us and our industry. We now have roughly 25,000 kids around the world wearing MiSight, including over 1,000 in the U.S., and the momentum when new fits is strong. But we already have 2,100 optometrists certified to fit the lens and 1,400 more in the process of being certified. launch, including the average age for a new MiSight wearer is 11 years old. Getting fits in this age range is fantastic as the average age for fitting a new wearer in regular contact lenses is 17, which means we're getting an extra six years' worth of revenue. Furthermore, 70% of kids being fit in MiSight are 12 and under. Regarding sales, even with continuing COVID challenges, our myopia management portfolio, including MiSight and Ortho K lenses, grew 39% to $13 million. Within these results, MiSight grew 73% to $2.5 million and Ortho K grew 33%, which included $1.3 million of revenue from last quarter's acquisition of GP Specialties. For this coming year, even with COVID impacting the market, we're continuing to target $25 million in global MiSight sales, which is growth of roughly 250%. But as we discussed last quarter, there's a clear path to a market that we expect will ultimately be well over $5 billion annually for manufacturers. But new fits are running roughly 90% of pre-COVID levels on a global basis, and that's the challenge. With roughly one-third of the world myopic, and this is expected to increase to 50% by 2050, combined with a continuing shift to daily silicone hydrogel lenses, geographic expansion, and strong growth in torics and multifocals, our industry has a very bright future. Revenues rebounded faster than expected to $175 million for the quarter. Although down 4%, we exceeded expectations in a challenging market environment and expect solid performance moving forward. Revenues rebounded nicely and were only down 2% year over year. The product almost doubled in revenue to $2.5 million and with a growing focus on safety and compliance within fertility clinics, we expect this product to continue growing nicely. Within our office and surgical unit, we were down 5%, slightly better than forecasted. PARAGARD continued to rebound, down 6% to $50 million against a tough comp from last year due to buy-in activity before price increase. PARAGARD is another product that is benefiting from the positive wellness trends we're seeing in the U.S. as the only 100% hormone-free IUD on the U.S. market, it offers a fantastic long-lasting birth control option that addresses the needs and interests of women looking for a healthy alternative. Our fourth-quarter consolidated revenues decreased 1% as reported or 3% in constant currency to $682 million. Consolidated gross margin increased 70 basis points year over year to 67.7%. OPEX was up 4.3% year over year, largely due to planned MiSight investment activity, including sales and marketing, regulatory, and R&D costs. This resulted in consolidated operating margins of 26.8%, down from 28.5% last year. Interest expense for the quarter was $6.7 million, driven by lower interest rates and lower average debt and the effective tax rate was 11.1%. Non-GAAP earnings per share was $3.16 with roughly 49.6 million average shares outstanding. The year-over-year FX impact for the quarter to revenue and earnings per share was a positive $10.6 million and a positive $0.15. Free cash flow was strong at $111 million, comprised of $218 million of operating cash flow offset by $107 million of CAPEX. Net debt decreased by $76 million to $1.68 billion, and our adjusted leverage ratio decreased to 2.15 times. This includes consolidated revenues of $642 million to $670 million, down 1% to up 4% or down 3% to up 2% in constant currency. CooperVision revenue of $482 million to $502 million, down 1% to up 4% or down 3% to up 1% in constant currency. And CooperSurgical revenue of $160 million to $168 million, down 1% to up 4%, both as reported and in constant currency. Non-GAAP earnings per share is expected to be in the range of $2.66 to $2.86. As compared to last year, we expect the midpoint of our non-GAAP earnings per share guidance to be up $0.07 due to a positive $0.21 currency impact, offset by MiSight investment activity and slightly lower gross margins tied to unfavorable manufacturing absorption.

Non-GAAP earnings per share were $3.16. Non-GAAP earnings per share was $3.16 with roughly 49.6 million average shares outstanding. This includes consolidated revenues of $642 million to $670 million, down 1% to up 4% or down 3% to up 2% in constant currency. Non-GAAP earnings per share is expected to be in the range of $2.66 to $2.86.

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In the quarter, we saw strong quarter growth in FoodTech at 22% year-over-year. On a year-over-year basis, revenue increased 1% at FoodTech, while declining 28% at AeroTech. FoodTech margins were in line with guidance, with operating margins of 13.3% and adjusted EBITDA margins of 18.7%. AeroTech margins were ahead of expectations, with operating margins of 9.3% and adjusted EBITDA margins of 10.7%. As a result, JBT posted adjusted diluted earnings per share from continuing operations of $0.90 or GAAP earnings per share of $0.84. Free cash flow for the quarter significantly exceeded our expectations at $78 million, driven by continued strong collection of accounts receivable and customer deposits. The robust cash flow performance improved our bank leverage ratio to 1.9 times and increased overall liquidity to $496 million. We expect to expand our balance sheet to support an increase in sales in the back half of the year to achieve full year free cash flow conversion just above 100%. Given the strength of orders and outlook for FoodTech we have raised, topline growth to 9% to 11%, up from our previous guidance of 5% to 8%. Therefore, we have lowered full year margin guidance by 25 basis points. Operating margin of 14.25% to 14.75% and adjusted EBITDA margins of 19.25% to 19.75%. Our guidance for AeroTech is unchanged with projected revenue growth of 0% to 5%. Operating margins of 10.75% to 11.25% and adjusted EBITDA margins of 12% to 12.5%. We are holding our forecast for corporate cost at 2.7% of sales, while lowering interest expense to about $11 million. Altogether, this increases the full year adjusted earnings per share range to $4.40 to $4.60. Our GAAP earnings per share guidance is now $4.20 to $4.40, with M&A and restructuring costs of $8 million to $10 million. We expect revenue of $325 million to $340 million at FoodTech and $105 million to $115 million at AeroTech. Our second quarter guidance for operating margins are 13.75% to 14.25% at FoodTech, with adjusted EBITDA margins of 19% to 19.5%. For AeroTech, operating margins are forecasted at 8.75% to 9.25%, the adjusted EBITDA margins of 10% to 10.5%. For the quarter, we expect corporate costs of $12 million to $13 million, M&A and restructuring costs of $4 million, interest expense of about $3 million. Factoring second quarter's adjusted earnings per share guidance to $0.90 to $1 and $0.80 to $0.90 on a GAAP basis. In the first quarter of 2021, FoodTech orders had a record $386 million. At AeroTech, although orders were down 35% compared to pre-pandemic levels a year ago, we've met our expectations and there are some encouraging signs.

As a result, JBT posted adjusted diluted earnings per share from continuing operations of $0.90 or GAAP earnings per share of $0.84. Given the strength of orders and outlook for FoodTech we have raised, topline growth to 9% to 11%, up from our previous guidance of 5% to 8%. Altogether, this increases the full year adjusted earnings per share range to $4.40 to $4.60. Our GAAP earnings per share guidance is now $4.20 to $4.40, with M&A and restructuring costs of $8 million to $10 million. Factoring second quarter's adjusted earnings per share guidance to $0.90 to $1 and $0.80 to $0.90 on a GAAP basis.

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Specifically, we delivered comp store sales growth of 3.1%, while sustaining an identical two-year stack of 13.3% compared with Q2. In addition, we also delivered significant improvements in our adjusted gross margin rate of 246 basis points, led by our category management initiatives. Our adjusted SG&A costs as a percentage of net sales were 209 basis points higher as we lapped a unique quarter in Q3 2020. Overall, we delivered adjusted operating income margin expansion of 37 basis points to 10.4% versus Q3 2020. Adjusted diluted earnings per share of $3.21 increased 21.6% compared with Q3 2020 and 31% compared with the same period of 2019. Our year-to-date adjusted earnings per share are up approximately 50% compared with 2020. Year-to-date, our balance sheet remains strong with a 19% increase in free cash flow to $734 million, while returning a record $953 million to our shareholders through a combination of share repurchases and quarterly cash dividend. As we all know, over the last 18 months, the pandemic changed consumer behavior across our industry, which led to a surge in DIY omnichannel growth in 2020, while the Professional business declined. We've implemented the dynamic assortment tool in all company-owned US stores as well as over 800 independent locations. During Q3, we announced a multi-year agreement with our national customer Bridgestone to sell DieHard batteries in more than 2,200 tire and vehicle service centers across the United States. In terms of our independent business, we added 16 net new independent Carquest stores in the quarter, bringing our total to 44 net new this year. In Q3, we continue to leverage our Speed Perks loyalty program as VIP membership grew by 13% and our number of ELITE members, representing the highest tier of customer spend, increased 21%. We successfully transitioned to our new WMS in approximately 36% of our distribution center network as measured by unit volume. We remain on track with our sales and profit per store initiative, including our average sales per store objective of $1.8 million per store by 2023. In terms of new locations year-to-date, we've opened 19 stores, six new WORLDPAC branches and converted 44 net new locations to the Carquest independent family. This puts our net new locations at 69, including stores, branches and independents during the first three quarters. Separately, we're actively working to convert the 109 locations in California we announced in April. In Q3, we saw a 22% reduction in our total recordable injury rate compared with the prior year. Our lost time injury rate improved 14% compared with the same period in 2020. This made it even easier for customers to participate and helped us achieve a record-setting campaign of $1.7 million. In Q3, our net sales increased 3.1% to $2.6 billion. Adjusted gross profit margin improved 246 basis points to 46.2%, primarily the result of our ongoing category management initiatives, including strategic pricing, strategic sourcing, own brand expansion and favorable product mix. In the quarter, same SKU inflation was approximately 3.6%, which was part of [Phonetic] our plan entering the year and was by far the largest headwind we had to overcome within gross profit. Year-to-date, adjusted gross margin improved 184 basis points compared with the same period of 2020. As a percent of net sales, our adjusted SG&A deleveraged by 209 basis points, driven primarily by labor costs, which included a meaningful cost per hour increase as well as higher incentive compensation compared to the prior year. In addition, we incurred higher delivery expenses related to serving our Professional customers and approximately $10 million in start-up costs related to the conversion of our California locations in Q3. Year-to-date, SG&A as a percent of net sales was relatively flat compared to the same period of 2020, increasing 9 basis points year-over-year. While we've reduced our COVID-19-related costs by $13 million year-to-date, the health and safety of our team members and customers continues to be our top priority. Our adjusted operating income increased to $274 million in Q3 compared to $256 million one year ago. On a rate basis, our adjusted OI margin expanded by 37 basis points to 10.4%. Finally, our adjusted diluted earnings per share increased 21.6% to $3.21 compared to $2.64 in Q3 of 2020. Compared with 2019, adjusted diluted earnings per share was up 31% in the quarter. Our free cash flow for the first nine months of the year was $734 million, an increase of 19% versus last year. This increase was primarily driven by improvements in our operating income as well as our continued focus on working capital metrics, including our accounts payable ratio, which expanded 351 basis points versus Q3 2020. Year-to-date through Q3, our capital investments were $191 million. In Q3, we returned approximately $228 million to our shareholders through the repurchase of 1.1 million shares at an average price of $205.65. Year-to-date, we've returned approximately $792 million to our shareholders through the repurchase of nearly 4.2 million shares at an average price of $189.43. Since restarting our share repurchase program in Q3 of 2018, we returned over $2 billion in share repurchases at an average share price of approximately $164. Additionally, we paid a cash dividend of $1 per share in the quarter totaling $63 million. This included improved pricing and terms while also increasing the overall facility size to $1.2 billion. This guidance incorporates continued top-line strength, ongoing inflationary headwinds and up to an additional $10 million in start-up costs in Q4 related to our West Coast expansion. As a result, we're updating our full year 2021 guidance to net sales of $10.9 billion to $10.95 billion, comparable store sales of 9.5% to 10%, adjusted operating income margin rate of 9.4% to 9.5%, a minimum of 30 new stores this year, a minimum of $275 million in capex and a minimum of $725 million in free cash flow.

Specifically, we delivered comp store sales growth of 3.1%, while sustaining an identical two-year stack of 13.3% compared with Q2. Adjusted diluted earnings per share of $3.21 increased 21.6% compared with Q3 2020 and 31% compared with the same period of 2019. In Q3, our net sales increased 3.1% to $2.6 billion. Finally, our adjusted diluted earnings per share increased 21.6% to $3.21 compared to $2.64 in Q3 of 2020. As a result, we're updating our full year 2021 guidance to net sales of $10.9 billion to $10.95 billion, comparable store sales of 9.5% to 10%, adjusted operating income margin rate of 9.4% to 9.5%, a minimum of 30 new stores this year, a minimum of $275 million in capex and a minimum of $725 million in free cash flow.

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And we're very happy that our Samuel Adams Restaurants Strong Fund has raised over $5.4 million so far to support bar and restaurant workers who are experiencing hardship in the wake of COVID-19. Working with the Greg Hill Foundation, this fund is committed to distributing 100% of its proceeds to grants to bar and restaurant workers across the country. While doing this, we also achieved depletions growth of 46% in the second quarter of which 42% is from Boston Beer legacy brands and 4% is from the addition of the Dogfish Head brands. Given our trends for the first half and our current view of the remainder of the year, we've adjusted our expectations for higher 2020 full-year earnings, depletions and shipment growth, which is primarily driven by the strong performance of our Truly and Twisted Tea brands. Based on information in hand, year-to-date depletions reported to the company through the 28 weeks ended July 11, 2020, are estimated to have increased approximately 42% from the comparable weeks in 2019. Excluding the Dogfish Head impact, depletions increased 37%. For the second quarter, we reported net income of $60.1 million, an increase of $32.3 million or 116% from the second quarter of 2019. Earnings per diluted share were $4.88, an increase of $2.52 per diluted share from the second quarter of 2019. This increase was primarily due to increased revenue driven by shipment growth of 39.8% partly offset by lower gross margins and higher operating expenses. We began seeing the impact of COVID-19 pandemic in our business in early March. To-date, the direct financial impact of the pandemic has primarily shown in significantly reduced keg demand from the on-premise channel and higher labor and safety related cost at our breweries. In the first half of 2020, we reported COVID-19 pre-tax-related reductions in net revenue and increases in other costs totally $14.1 million, of which $10 million was recorded in the first quarter and $4.1 million was recorded in the second quarter. The total amount consists of a $5.8 million reduction in net revenue for our estimated keg returns from distributors and retailers, and $8.3 million of other COVID-19 related direct costs, of which $5.6 million are recorded in cost of goods sold and $2.7 million are recorded in operating expenses. Shipment volume was approximately 1.9 million barrels, a 39.8% increase from the second quarter of 2019. Excluding the addition of the Dogfish Head brand beginning July 3, 2019, shipments increased 35.3%. We believe distributor inventory as of June 27, 2020 averaged approximately 2.5 weeks on hand and was lower than prior year levels due the supply chain capacity constraints. Our second quarter 2020 gross margin of 46.4% decreased from the 49.9% margin realized in the second quarter of 2019 primarily as a result of higher processing cost due to increased production in third-party breweries, partially offset by price increases and cost-saving initiatives at company-owned breweries. Second quarter advertising, promotional and selling expenses increased by $6.3 million in the second quarter of 2019 primarily due to increases in salaries and benefits cost, increased brand investments in media and production, the addition of Dogfish Head brand related expenses beginning July 3, 2019, and increased freight to distributors due to higher volumes partially offset by decreased investments in local marketing and national promotions due to timing of these costs compared to the prior year. General and administrative expenses increased by $2.9 million in the second quarter of 2019, primarily due to increases in salaries and benefits cost and the addition of Dogfish Head general and administrative expenses beginning July 3, 2019, partially offset by the non-recurrence of $1.5 million in Dogfish Head transaction-related fees incurred in the second quarter of 2019. Based on information which we're currently aware, we are now targeting full year 2020 earnings per diluted share of between $11.70 and $12.70. This projection excludes the impact of ASU 2016-09. Full year 2020 depletions growth including Dogfish Head is now estimated to be between 27% and 35% of which between 1% and 2% are due to the addition of the Dogfish Head brand. We project increases in revenue per barrel of between 1% and 2%. Full year 2020 gross margins are expected to be between 46% and 48%. We plan to increase investments in advertising, promotional and selling expenses of between $70 million and $80 million for the full year 2020. We estimate our full year 2020 non-GAAP effective tax rate to be approximately 26%, which excludes the impact of ASU 2016-09. We are continuing to evaluate 2020 capital expenditures and currently estimate investments of between $180 million and $200 million. We expect that our cash balance of $86.7 million as of June 27, 2020 along with our future operating cash flow and unused line of credit of $150 million will be sufficient to fund future cash requirement.

Given our trends for the first half and our current view of the remainder of the year, we've adjusted our expectations for higher 2020 full-year earnings, depletions and shipment growth, which is primarily driven by the strong performance of our Truly and Twisted Tea brands. Earnings per diluted share were $4.88, an increase of $2.52 per diluted share from the second quarter of 2019. We began seeing the impact of COVID-19 pandemic in our business in early March. To-date, the direct financial impact of the pandemic has primarily shown in significantly reduced keg demand from the on-premise channel and higher labor and safety related cost at our breweries. In the first half of 2020, we reported COVID-19 pre-tax-related reductions in net revenue and increases in other costs totally $14.1 million, of which $10 million was recorded in the first quarter and $4.1 million was recorded in the second quarter. Based on information which we're currently aware, we are now targeting full year 2020 earnings per diluted share of between $11.70 and $12.70.

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We recognize a climate change is the greatest scientific challenge of the 21st century and support the aim of the Paris Agreement and a global ambition to achieve net zero emissions by 2050. The world faces the dual challenge of needing 20% more energy by 2040 and reaching net zero carbon emissions by 2050. In the International Energy Agency's rigorous sustainable development scenario, which assumes that all pledges of the Paris agreement are met, oil and gas will be 46% of the energy mix in 2040 compared with approximately 53% today. In the IEA's newest net zero scenario, oil and gas will still be 29% of the energy mix in 2040. In either scenario, oil and gas will be needed for decades to come and will require significantly more global investment over the next 10 years on an annual basis than the $300 billion spent last year. Guyana is positioned to become a significant cash engine in the coming years, as multiple phases of low-cost oil developments come online, which we expect will drive our portfolio breakeven Brent oil price below $40 per barrel by the middle of the decade. Based on the most recent third-party estimates, our cash flow is estimated to grow at a compound annual growth rate of 42% between 2020 and 2023, which is 75% above our peers and puts us in the top 5% of the S&P 500. With a line of sight for up to 10 FPSOs to develop the discovered resources in Guyana, this industry leading cash flow growth rate is expected to continue through the end of the decade. We are pleased to announce today that in July, we paid down $500 million of our $1 billion term loan maturing in March 2023. Depending upon market conditions, we plan to repay the remaining $500 million in 2022. This debt reduction, combined with the start-up of Liza Phase 2 early next year is expected to drive our debt-to-EBITDAX ratio under 2 times next year. We expect to receive approximately $375 million in proceeds and our ownership in Hess Midstream on a consolidated basis, will be approximately 45% compared with 46% prior to the transaction. On April 30, we completed the sale of our Little Knife and Murphy Creek nonstrategic acreage interest in The Bakken for a total consideration of $312 million effective March 1, 2021. We have a large inventory of future drilling locations that generate attractive financial returns at $50 per barrel WTI. In February, when WTI oil prices moved above $50 per barrel, we added a second rig, given the continued strength in oil prices, we are now planning to add a third rig in the Bakken in September, which is expected to strengthen free cash flow generation in the years ahead. We have an active exploration and appraisal program this year on the Stabroek Block, where Hess has a 30% interest and ExxonMobil is the operator. We see the potential for at least six FPSOs on the block by 2027 and up to 10 FPSOs to develop the discovered resources on the block, and we continue to see multibillion barrels of future exploration potential remaining. The Whiptail number 1 well encountered 246 feet of net pay and the Whiptail number 2 well, which is located three miles northeast of Whiptail-1 encountered 167 feet of net pay in high quality oil bearing sandstone reservoirs. The Whiptail discovery could form the basis for our future oil development in the Southeast area of the Stabroek Block and will add to the previous recoverable resource estimate of approximately 9 billion barrels of oil equivalent. In June, we also announced the discovery at the Longtail-3 well which encountered approximately 230 feet of net pay including newly identified high quality hydrocarbon bearing reservoirs, below the original Longtail-1 discovery intervals. In addition, the successful Mako-2 well, together with Uaru-2 well which encountered approximately 120 feet of high quality oil bearing sandstone reservoir will potentially underpin a fifth oil development in the area east of the Liza complex. In terms of Guyana developments, the Liza Unity FPSO with a gross capacity of 220,000 barrels of oil per day is expected to sail from Singapore to Guyana in late August and the Liza-2 development is on track to achieve first oil in early 2022. Our third oil development on the Stabroek Block at the Payara field is expected to achieve first oil in 2024, also with a gross capacity of 220,000 barrels of oil per day. Engineering work for our fourth development on the Stabroek Block at Yellowtail is underway with preliminary plans for a gross capacity in the range of 220,000 to 250,000 barrels of oil per day and anticipated start-up in 2025 pending government approvals and project sanctioning. Our three sanctioned oil developments have a breakeven Brent oil price of between $25 and $35 per barrel. In 2020 we significantly surpassed our five-year emission reduction targets reducing Scope 1 and 2 operated greenhouse gas emissions intensity by 46% and flaring intensity by 59% compared to 2014 levels. Our five year operated emission reduction targets for 2025 which are detailed in the sustainability report exceed the 22% reduction in carbon intensity by 2030 in the International Energy Agency sustainable development scenario, which is consistent with the Paris Agreements ambition to hold the rise in global average temperature to well below 2 degrees centigrade. In May, Hess was named to the 100 Best Corporate Citizens list for the 14th consecutive year, based upon an independent assessment by ISS ESG. Companywide net production averaged 307,000 barrels of oil equivalent per day excluding Libya, above our guidance of 290,000 to 295,000 barrels of oil equivalent per day, driven by good performance across the portfolio. In the third quarter, we expect companywide net production to average approximately 265,000 barrels of oil equivalent per day excluding Libya, which reflects the Tioga Gas Plant turnaround in the Bakken and planned maintenance in the Gulf of Mexico and Southeast Asia. For full year 2021, we now forecast net production to average approximately 295,000 barrels of oil equivalent per day excluding Libya, compared to our previous forecast of between 290,000 and 295,000 barrels of oil equivalent per day, so we're now forecasting to be at the top of the range. Second quarter net production averaged 159,000 barrels of oil equivalent per day. This was above our guidance of approximately 155,000 barrels of oil equivalent per day, primarily reflecting increased gas capture which has allowed us to drive flaring to under 5%, well below the state's 9% limit. For the third quarter we expect Bakken net production to average approximately 145,000 barrels of oil equivalent per day, which reflects the planned 45 day maintenance turnaround and expansion tie-in at the Tioga Gas Plant. For the full year 2021, we maintain our Bakken net production forecast of 155,000 to 160,000 barrels of oil equivalent per day. In the second quarter, we drilled 17 wells and brought nine new wells online. In the third quarter, we expect to drill approximately 15 wells and to bring approximately 20 new wells online. And for the full year 2021, we now expect to drill approximately 65 wells and to bring approximately 50 new wells online. In terms of drilling and completion costs, although we have experienced some cost inflation, we are confident that we can offset the increases through technology and lean manufacturing efficiency gains and are therefore maintaining our full year average forecast of $5.8 million per well in 2021. In the deepwater Gulf of Mexico, second quarter net production averaged 52,000 barrels of oil equivalent per day compared to our guidance of approximately 50,000 barrels of oil equivalent per day. In the third quarter, we forecast Gulf of Mexico net production to average between 35,000 and 40,000 barrels of oil equivalent per day, reflecting planned maintenance downtime as well as some hurricane contingency. For the full year 2021, our forecast for Gulf of Mexico net production remains approximately 45,000 barrels of oil equivalent per day. In Southeast Asia, net production in the second quarter was 66,000 barrels of oil equivalent per day, above our guidance of approximately 60,000 barrels of oil equivalent per day. Third quarter net production is forecast to average between 50,000 and 55,000 barrels of oil equivalent per day, reflecting planned maintenance at North Malay Basin and the JDA as well as Phase-3 installation work at North Malay Basin. Full year 2021 net production is forecast to average approximately 60,000 barrels of oil equivalent per day. Now turning to Guyana, in the second quarter gross production from Liza phase one averaged 101,000 barrels of oil per day or 26,000 barrels of oil per day net to Hess. The operator is evaluating the test data to optimize performance and is safely managing production in the range of 120,000 to 125,000 barrels of oil per day. Net production from Liza Phase-1 is forecast to average approximately 30,000 barrels of oil per day in the third quarter and for the full year 2021. The Liza Phase-2 development will utilize the 220,000 barrels of oil per day Unity FPSO which is scheduled to sail away from Singapore at the end of August and first order remains on track for early 2022. The overall project is approximately 45% completed. The Prosperity will have a gross production capacity of 220,000 barrels of oil per day and is on track to achieve first oil in 2024. During the second quarter the Mako-2 Appraisal well on the Stabroek Block confirmed the quality, thickness and areal extent of the reservoir. When integrated with the previously announced discovery at Uaru-2, the data supports a potential fifth development in the area east of the Liza complex. In terms of other drilling activity in the second half of 2021 after Whiptail-2, the Noble Don Taylor will drill the Pinktail exploration well, which is located five miles southeast of Yellowtail one, followed by the Tripletail-2 appraisal well, located five miles south of Tripletail-1. The Noble Tom Madden will spud the Kaieteur Block-1 exploration well located 4.5 miles southeast of the Turbot-1 discovery in early August. Then in the fourth quarter, we will drill our first dedicated test of the deep potential at the [Indecipherable] prospect located 9 miles northwest of Liza-1. In the third quarter, The Noble Sam Croft will drill the Turbot-2 appraisal well then transition to development drilling operations for the remainder of the year. The Stena Carron will conduct a series of appraisal drill stem tests at Uaru-1, Mako-2 and then Longtail-2. Adjusted net income was $74 million in the second quarter of 2021, compared to net income of $252 million in the first quarter of 2021. E&P adjusted net income was $122 million in the second quarter of 2021 compared to net income of $308 million in the previous quarter. The changes in the after-tax components of adjusted E&P results between the second quarter and first quarter of 2021 were as follows: Lower sales volumes reduced earnings by $126 million; higher cash costs reduced earnings by $48 million; higher exploration expenses reduced earnings by $10 million; all other items reduced earnings by $2 million, for an overall decrease in second quarter earnings of $186 million. Second quarter sales volumes were lower, primarily due to Guyana having two, 1 million barrel liftings of oil, compared with three, 1 million barrel liftings in the first quarter and first quarter sales volumes included non-recurring sales of two VLCC cargos totaling 4.2 million barrels of Bakken crude oil, which contributed approximately $70 million of net income. In the second quarter, our E&P sales volumes were under lifted compared with production by approximately 785,000 barrels, which reduced our after-tax results by approximately $18 million. As a result of the bankruptcy, Hess as one of the predecessors in title in 7 Shallow Water, West Delta 79-86 leases held by Fieldwood is responsible for the abandonment of the facilities on the leases. Second quarter E&P results include an after tax charge of $147 million representing the estimated gross abandonment obligation for West Delta 79-86 without taking into account potential recoveries from other previous owners. The Midstream segment had net income of $76 million in the second quarter of 2021 compared to $75 million in the prior quarter. Midstream EBITDA before noncontrolling interest amounted to $229 million in the second quarter of 2021 compared to $225 million in the previous quarter. At quarter end, excluding Midstream, cash and cash equivalents were $2.42 billion, which includes receipt of net proceeds of $297 million from the sale of our Little Knife and Murphy Creek acreage in the Bakken. Total liquidity was $6.1 billion, including available committed credit facilities, while debt and finance lease obligations totaled $6.6 billion. Our fully undrawn $3.5 billion revolving credit facility is committed through May 2024 and we have no material near-term debt maturities aside from the $1 billion term loan which matures in March 2023. In July, we repaid $500 million of the term loan. Earlier today Hess Midstream announced an agreement to repurchase approximately 31 million Class B units of Hess Midstream held by GIP and us for approximately $750 million. We expect to receive net proceeds of approximately $375 million from the sale in the third quarter. In addition, we expect to receive proceeds in the third quarter from the sale of our interest in Denmark for total consideration of $150 million with an effective date of January 1, 2021. In the second quarter of 2021, net cash provided by operating activities before changes in working capital was $659 million compared with $815 million in the first quarter, primarily due to lower sales volumes. In the second quarter, net cash provided by operating activities after changes in working capital was $785 million compared with $591 million in the first quarter. Changes in operating assets and liabilities during the second quarter of 2021 increased cash flow from operating activities by $126 million, primarily driven by an increase in payables that we expect to reverse in the third quarter. Our E&P cash costs were $11.63 per barrel of oil equivalent including Libya and $12.16 per barrel of oil equivalent, excluding Libya in the second quarter of 2021. We project E&P cash costs, excluding Libya to be in the range of $13 to $14 per barrel of oil equivalent for the third quarter, which reflects the impact of lower production volumes resulting from the Tioga Gas Plant turnaround. Full year cash cost guidance of $11 to $12 per barrel of oil equivalent remains unchanged. DD&A expense was $11.55 per barrel of oil equivalent including Libya and $12.13 per barrel of oil equivalent excluding Libya in the second quarter. DD&A expense excluding Libya is forecast to be in the range of $12 to $13 per barrel of oil equivalent for the third quarter and full-year guidance of $12 to $13 per barrel of oil equivalent remains unchanged. This results in projected total E&P unit operating costs, excluding Libya to be in the range of $25 to $27 per barrel of oil equivalent for the third quarter and $23 to $25 per barrel of oil equivalent for the full year of 2021. Exploration expenses excluding dry hole costs are expected to be in the range of $40 million to $45 million in the third quarter and full-year guidance is expected to be in the range of $160 million to $170 million, which is down from previous guidance of $170 million to $180 million. And Midstream tariff is projected to be in the range of $265 million to $275 million for the third quarter and full-year guidance is projected to be in the range of $1,080 million to $1,100 million, which is down from the previous guidance of $1,090 million to $1,115 million. E&P income tax expense, excluding Libya is expected to be in the range of $35 million to $40 million for the third quarter and full-year guidance is expected to be in the range of $125 million to $135 million, which is updated from the previous guidance of $105 million to $15 million reflecting higher commodity prices. We expect non-cash option premium amortization will be approximately $65 million for the third quarter and full-year guidance of approximately $245 million remains unchanged. During the third quarter, we expect to sell three 1 million barrel cargoes of oil from Guyana. Our E&P capital and exploratory expenditures are expected to be approximately $575 million in the third quarter. Full-year guidance, which now includes increasing drilling rigs in the Bakken to three from two in September, remains unchanged from prior guidance at approximately $1.9 billion. We anticipate net income attributable to Hess from the Midstream segment to be in the range of $50 million to $60 million for the third quarter and full-year guidance is projected to be in the range of $275 million to $285 million, which is down from the previous guidance of $280 million to $290 million. Corporate expenses are estimated to be in the range of $30 million to $35 million for the third quarter and full-year guidance of $130 million to $140 million remains unchanged. Interest expense is estimated to be in the range of $95 million to $100 million for the third quarter and approximately $380 million for the full year, which is at the lower end of our previous guidance of $380 million to $390 million reflecting the $500 million reduction in the term loan.

Companywide net production averaged 307,000 barrels of oil equivalent per day excluding Libya, above our guidance of 290,000 to 295,000 barrels of oil equivalent per day, driven by good performance across the portfolio. For full year 2021, we now forecast net production to average approximately 295,000 barrels of oil equivalent per day excluding Libya, compared to our previous forecast of between 290,000 and 295,000 barrels of oil equivalent per day, so we're now forecasting to be at the top of the range. Second quarter net production averaged 159,000 barrels of oil equivalent per day. In the deepwater Gulf of Mexico, second quarter net production averaged 52,000 barrels of oil equivalent per day compared to our guidance of approximately 50,000 barrels of oil equivalent per day. At quarter end, excluding Midstream, cash and cash equivalents were $2.42 billion, which includes receipt of net proceeds of $297 million from the sale of our Little Knife and Murphy Creek acreage in the Bakken.

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Our third quarter operating earnings were $0.78 per share compared to $1.11 per share in the third quarter of 2018. The combined ratio was 98.6% in the third quarter of 2019 compared to 95.6% in the third quarter of 2018. The deterioration in the combined ratio in the quarter was primarily from worst results in our private passenger auto business outside of California and our California commercial auto business which together added 2.8 points to the companywide combined ratio in the third quarter of 2019 compared to the third quarter of 2018. For states outside of California, we posted a private passenger auto combined ratio of 101% in the third quarter of 2019 compared to 82% in the third quarter of 2018. Those results include approximately $2 million of favorable prior-year reserve development on $86 million of earned premium compared to $12 million of favorable prior-year reserve development on $88 million of earned premium in the third quarter of 2018. Our California commercial auto business posted a combined ratio of approximately 120% in the third quarter of 2019 compared to 90% in the third quarter of 2018. Those results include approximately $6 million of unfavorable prior-year reserve development on $34 million of earned premium compared to $1 million of unfavorable prior-year reserve development on $29 million of earned premium in the third quarter of 2018. Our California private passenger auto combined ratio deteriorated slightly to approximately 97.6% in the third quarter of 2019 from 97.4% in the third quarter of 2018. Overall, frequency was relatively flat and severity was up approximately 7% compared to the third quarter of 2018. In California, a 6.9% personal auto rate increase for California Automobile Insurance Company was implemented in March 2019 and a 6.9% personal auto rate increase for Mercury Insurance Company was implemented in May of 2019. Approximately 81% of the California Automobile Insurance Company rate increase was earned during the quarter and about 53% of the Mercury Insurance Company rate increase was earned during the quarter. Our third quarter 2019 California private passenger auto frequency and severity, each increased by about 4% compared to the second quarter of 2019. The sequential increase in frequency and severity was the primary reason our California private passenger auto combined ratio deteriorated from approximately 96.7% in the second quarter of 2019 to 97.6% in the third quarter of 2019. Our year-to-date accident year combined ratio for California personal auto is approximately 96.1%. Our California homeowners combined ratio was 97.5% in the third quarter of 2019 compared to 101.2% in the third quarter of 2018. A 6.99% rate increase in our California homeowners line was approved by the California Department of Insurance and was implemented in August 2019. We also recently filed for another 6.9% rate increase in our California homeowners line of business. California homeowners premiums represent about 13% of direct companywide premiums earned. Companywide, we recorded $1 million of favorable prior-year reserve development in the quarter compared to $6 million of unfavorable reserve development in the third quarter of 2018. Catastrophe losses, primarily from Hurricane Imelda in Texas, were $3 million in the quarter compared to $13 million in the third quarter of 2018, primarily from the Carr Wildfire in Redding, California. The expense ratio was 24.2% in the third quarter compared to 24% in the third quarter of 2018. The slightly higher expense ratio was primarily due to a $6 million increase in accrued expense related to our previously announced settlement with the California Department of Insurance, partially offset by a decrease in profitability-related accruals, slightly lower acquisition costs and cost efficiency savings. Premiums written grew 8.6% in the quarter, primarily due to higher average premiums per policy and an increase in homeowners policies written. Our catastrophe reinsurance treaty provides coverage for wildfire catastrophe losses in excess of Mercury's $40 million retention has a total wildfire limit of $508 million and allows for one full reinstatement.

Our third quarter operating earnings were $0.78 per share compared to $1.11 per share in the third quarter of 2018.

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Second quarter revenues increased 42% year-over-year to $603 million compared to our guidance range of $535 million to $550 million. Organic growth is a key priority, and revenues increased 28% year-over-year on an organic basis. Incoming order rates were strong during the quarter, increasing 74% year-over-year and 18% sequentially. This resulted in a healthy book-to-bill ratio of 1.19 times. EBITDA increased 90% year-over-year to $93 million. EBITDA margins expanded 390 basis points from 11.6% in the year-ago period to 15.5%. EPS increased 163% year-over-year to $1.21 compared to $0.46 in the year-ago period and our guidance range of $0.88 to $0.98. For the full year 2021, we are increasing the high end of our revenue and earnings per share guidance ranges by 170 and $0.77 respectively. Industrial Solutions revenues increased 32% organically with broad-based strength in each of our primary market verticals and regions. During the second quarter, we received a $6 million award for a project with a large investor-owned utility in the United States for the implementation of a critical communications network. These products previously contributed approximately $15 million in annual revenue, with an immaterial contribution to EBITDA and cash flow, and we were pleased with the $11 million sales price. Enterprise Solutions revenues increased 23% year-over-year on an organic basis in the second quarter. Within the segment, revenues in broadband and 5G increased 13% organically. Broadband fiber revenues increased 28% organically year-to-date in 2021 after similar growth in 2020. Revenues in smart buildings increased 36% year-over-year on an organic basis, substantially exceeding our expectations. Revenues were $603 million in the quarter, increasing $178 million or 42% from $425 million in the second quarter of 2020. Revenues increased 28% organically compared to the prior year and 9% sequentially. Incoming order rates were also very strong during the quarter, increasing 74% year-over-year and 18% sequentially. This resulted in a book-to-bill ratio of 1.19 times, including 1.22 times in Industrial Solutions and 1.16 times in Enterprise Solutions. Gross profit margins in the quarter were 35.7%, increasing 30 basis points compared to 35.4% in the year-ago period. In the second quarter, the pass-through of higher copper prices had an unfavorable impact of 320 basis points. Excluding the impact of this pass-through, gross profit margins would have increased 350 basis points year-over-year. EBITDA was $93 million, increasing $44 million or 90% compared to $49 million in the prior year period. EBITDA margins were 15.5%, increasing 390 basis points compared to 11.6% in the year ago period. Excluding the impact of higher copper pass through pricing, EBITDA margins would have increased 510 basis points year-over-year, demonstrating solid operating leverage on higher volumes. At current foreign exchange rates, we expect interest expense to be approximately $62 million in 2021. Our effective tax rate was 18.2% in the second quarter as we benefited from incremental discrete tax planning items. We expect an effective tax rate of approximately 19% in the third quarter and 19.5% for the full year 2021. Net income in the quarter was $55 million compared to $20 million in the prior year period. Earnings per share was $1.21 compared to $0.46 in the second quarter of 2020. The Industrial Solutions segment generated revenues of $335 million in the quarter, increasing 51% from $221 million in the second quarter of 2020. Segment revenues increased 32% organically. Revenues in industrial automation, our largest market, increased 36% year-over-year on an organic basis, with broad-based strength across each of our primary market verticals. Non-renewal bookings increased 12% year-over-year in the first half of the year. Industrial Solutions segment EBITDA margins were 16.9% in the quarter, increasing 500 basis points compared to 11.9% in the year-ago period. The Enterprise Solutions segment generated revenues of $268 million during the quarter, increasing 32% from $203 million in the second quarter of 2020. Segment revenues increased 23% organically. Revenues in broadband and 5G increased 13% year-over-year on an organic basis. This supports continued robust growth in our fiber optic products, which increased 21% organically in the second quarter. Revenues in the smart buildings market increased 36% year-over-year on an organic basis, substantially exceeding our expectations. Enterprise Solutions segment EBITDA margins were 13.2% in the quarter, increasing 230 basis points compared to 10.9% in the prior year period. Our cash and cash equivalent balance at the end of the second quarter was $423 million compared to $371 million in the prior quarter and $360 million in the prior year period. Working capital turns were 7.6 compared to 6.7 in the prior quarter and 5.5 in the prior year period. Days sales outstanding of 53 days compared to 54 in the prior quarter and 60 in the prior year period. Inventory turns were 5.1 compared to five in the prior quarter and 4.5 in the prior year, and our financial leverage improved significantly during the quarter. Net leverage was 3.3 times net debt-to-EBITDA at the end of the second quarter compared to four times in the prior quarter. Specifically, in July, we issued EUR300 million in new 10-year notes maturing in 2031. The interest rate on these notes is 3.375%, which matches the lowest interest rate on 10-year notes in the history of the company. Following the redemption, our debt maturities will range from 2026 to 2031, with an average interest rate of 3.6%. Cash flow from operations in the second quarter was $68 million compared to $40 million in the prior year period. Net capital expenditures were $16 million for the quarter compared to $20 million in the prior year period. And finally, free cash flow in the quarter was $52 million compared to $20 million in the prior year period. We are pleased with the year-to-date free cash flow generation, which is approximately $50 million better than the first half of 2020. We anticipate third quarter 2021 revenues of $590 million to $605 million and earnings per share of $1.11 to $1.21. For the full year 2021, we now expect revenues of $2.32 billion to $2.35 billion compared to prior guidance of $2.13 billion to $2.18 billion. This $170 million increase to the high end of our guidance range includes approximately $140 million from improved operational performance and $30 million from higher copper prices and current foreign exchange rates. Our revised full year guidance implies consolidated organic growth of approximately 15% to 17% compared to our prior expectation of 6% to 9%. We now expect full year 2021 earnings per share to be $4.37 to $4.57 compared to prior guidance of $3.50 to $3.80. Our revised guidance for the full year 2021 implies total revenue growth of 25% to 26% and earnings per share growth of 59% to 66%. We expect interest expense of approximately $62 million and an effective tax rate of 19.5% for the full year 2021.

EPS increased 163% year-over-year to $1.21 compared to $0.46 in the year-ago period and our guidance range of $0.88 to $0.98. Earnings per share was $1.21 compared to $0.46 in the second quarter of 2020. We anticipate third quarter 2021 revenues of $590 million to $605 million and earnings per share of $1.11 to $1.21.

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Regarding our results, in the third quarter, we recorded an after-tax special item benefit of $35 million or $0.10 per share for integration and transaction related costs. During the quarter, we delivered adjusted revenue of $44 billion and adjusted earnings per share of $5.73 per share, all while continuing to reinvest back in our business to fund growth, expansion and ongoing innovation, and we continue to return significant value to our shareholders. With our high performing health service portfolio and sharp focus on executing our strategy, we are confident in our ability to continue driving growth and are again raising our full-year 2001 guidance for adjusted earnings per share and revenue. Separately, in early October we also announced an agreement with Chubb to sell our life, accident and supplemental benefits business in our International Markets platform in seven countries for $5.75 billion. We expect to realize about $5.4 billion in net after-tax proceeds and complete the transaction in 2022 following regulatory approvals. It's our privilege to serve almost 10 million active duty service members, retirees and their families. UPMC has been an Evernorth pharmacy client for 16 years and this agreement illustrates how we are collaborating across our enterprise to deliver greater affordability and differentiated value for health plan clients. For 2022 calendar year, 89% of our Medicare Advantage customers will be in four star or greater plans nationally. And in our individual and family plan business, we've driven strong growth in this year, increasing customers by 47% through the third quarter. We are positioning ourselves to build on this momentum in the individual family plan business by expanding our addressable markets, again as we enter in three new states and 93 new counties in 2022. These new markets offer the potential to reach an additional 1.5 million customers. Specifically for 2021, we are committed to delivering our increased guidance for full-year adjusted earnings per share of at least $20.35. For full year 2021, we remain on track for generating at least $7.5 billion of cash flow from operations and we expect to return more than $7 billion to shareholders in 2021 through dividends and share repurchase. Looking into 2022, we expect to grow earnings per share by at least 10% off of our increased 2021 guidance of at least $20.35 per share. Importantly, I would remind you that approximately 80% of our revenues are from service-based businesses that are not significantly exposed to medical cost fluctuations. Key consolidated financial highlights in third quarter 2021 include adjusted revenue growth of 9% to $44.3 billion, adjusted earnings growth of 20% to $1.9 billion after tax, and adjusted earnings-per-share growth of 30% to $5.73. Third quarter 2021 adjusted revenues grew 13% to $33.6 billion. Adjusted pharmacy script volume increased 8% to 411 million scripts and adjusted pre-tax earnings grew 7% to $1.5 billion compared to third quarter 2020. Third quarter adjusted revenues were $10.5 billion and adjusted pre-tax earnings were approximately $1 billion. The net effect of these claim cost impacts produced a medical care ratio of 84.4% in the third quarter. Turning to membership, w ended the quarter with 17 million total medical customers, an increase of approximately 368,000 customers year-to-date. In our international markets business, third quarter adjusted revenues were $1.6 billion and adjusted pre-tax earnings were $250 million. Corporate and Other operations delivered a third quarter adjusted loss of $275 million. We are raising our adjusted earnings per share guidance for full-year 2021 to at least $20.35 per share, reflecting the strength of the quarter, the favorable impact of our year-to-date share repurchase and acknowledgment of the ongoing fluidity of the broader environment. This represents earnings per share growth of at least 10% from 2020, consistent with our long-term earnings per share growth range of 10% to 13%, even with the ongoing challenges associated with COVID-19 and while having significantly increased our dividend in 2021. These dynamics are fully contemplated in our 2021 expectation for adjusted earnings per share of at least $20.35 and our 2022 expectation for earnings per share growth of at least 10% off this 2021 guidance. We now expect full-year 2021 consolidated adjusted revenues of at least one $172 billion, representing growth of at least 11% from 2020, when adjusting for the divestiture of our Group Disability and Life business. I would note this revenue growth rate significantly exceeds our projected long-term average annual growth goal of 6% to 8% and represents a third consecutive year of significant revenue outperformance since our combination with Express Scripts in late 2018. For Evernorth, we continue to expect full-year 2021 adjusted earnings of at least $5.8 billion, representing growth of at least 8% over 2020, reflecting the significant value we create for our customers and clients. For U.S. Medical, we continue to expect full-year 2021 adjusted earnings of at least $3.5 billion. Underlying this updated outlook, we now expect the 2021 medical care ratio to be in the range of 84% to 84.5%, which includes our expectations for elevated medical costs for Individual special enrollment period customers. Regarding total medical customers, we continue to expect 2021 growth of at least 350,000 customers. For full-year 2021, we continue to expect at least $7.5 billion of cash flow from operations, reflecting the strong capital efficiency of our well-performing businesses. Year-to-date, as of November 3, 2021, we have repurchased 26.5 million shares for $6.3 billion and we now expect full-year 2021 weighted average shares of approximately 342 million shares. This includes the impact of the $2 billion accelerated share repurchase that we announced in the third quarter. On October 27th, we declared a $1 per share dividend payable on December 22nd to shareholders of record as of December 7th. We now expect 2021 full-year adjusted earnings of at least $20.35 per share, representing growth of at least 10% from 2020 consistent with our long-term earnings per share growth rate range of 10% to 13%, and we expect to grow 2022 adjusted earnings per share at least 10% off our raised 2021 guidance.

Specifically for 2021, we are committed to delivering our increased guidance for full-year adjusted earnings per share of at least $20.35. Looking into 2022, we expect to grow earnings per share by at least 10% off of our increased 2021 guidance of at least $20.35 per share. Key consolidated financial highlights in third quarter 2021 include adjusted revenue growth of 9% to $44.3 billion, adjusted earnings growth of 20% to $1.9 billion after tax, and adjusted earnings-per-share growth of 30% to $5.73. The net effect of these claim cost impacts produced a medical care ratio of 84.4% in the third quarter. We are raising our adjusted earnings per share guidance for full-year 2021 to at least $20.35 per share, reflecting the strength of the quarter, the favorable impact of our year-to-date share repurchase and acknowledgment of the ongoing fluidity of the broader environment. These dynamics are fully contemplated in our 2021 expectation for adjusted earnings per share of at least $20.35 and our 2022 expectation for earnings per share growth of at least 10% off this 2021 guidance. We now expect full-year 2021 consolidated adjusted revenues of at least one $172 billion, representing growth of at least 11% from 2020, when adjusting for the divestiture of our Group Disability and Life business. Underlying this updated outlook, we now expect the 2021 medical care ratio to be in the range of 84% to 84.5%, which includes our expectations for elevated medical costs for Individual special enrollment period customers. We now expect 2021 full-year adjusted earnings of at least $20.35 per share, representing growth of at least 10% from 2020 consistent with our long-term earnings per share growth rate range of 10% to 13%, and we expect to grow 2022 adjusted earnings per share at least 10% off our raised 2021 guidance.

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Our cash flow increased to nearly $3 billion year to date, consistent with pre-pandemic levels. Third quarter highlights from funds from operation starts with $1.18 billion or $3.13 per share. Included in the third quarter results were a noncash after-tax gain of $0.30 per share from the contribution of our interest in the Forever 21 and Brooks Brothers licensing ventures for additional equity ownership in Authentic Brands Group. We now own approximately 11% of ABG and a loss on extinguishment of debt of $0.08 per share from the redemption of the $1.65 billion of senior notes. However, the quarter was below our budget by roughly $0.03 per share, primarily due to various COVID restrictions. Domestic property NOI increased 24.5% year over year for the quarter and 8.8% year to date. And if you did include TRG and international properties, our portfolio NOI increased 34.3% for the quarter and 18.7% year to date. Occupancy was 92.8%, which was an increase of 100 basis points compared to the second quarter. Average base rent was $53.91. For the first nine months, we signed 3,500 leases for 12.8 million square feet, which was nearly 3 million square feet or approximately 800 more deals compared to the first nine months of 2019. Mall sales for the third quarter were up 11% compared to third quarter 2019, up 43% year over year. Our sales are over 2019 peak levels. Our share of net cost of development projects is now approaching $1 billion. Our liquidity position is at $1.5 billion, and there's no outstanding balance on their line of credit. TRG is operating above our underwriting, posted also impressive results for cash flow growth, occupancy gains in retail sales, which were 16% higher. As you know, we amended and extended our $3.5 billion revolving credit facility. We refinanced a number of mortgages, and our liquidity stands at $8 billion including $6.9 billion available on our credit facility, the rest in our share of cash. We paid a dividend of $1.50 in September. That was a 7.1% increase sequentially and 15.4% year over year. Today, we announced our fourth quarter dividend of $1.65 per share in cash, which is an increase of 10% sequentially and 27% year over year. Now we raised our guidance from $10.70 to $10.80 last quarter to $11.55 to $11.65 per share. This is 85% increase on the midpoint. That's 27% to 28% growth compared to 2020 results and basically $2 higher than our initial budget this year. Our current multiple of 13 times is approximately three turns lower than our historical average and screens very cheap compared to the REIT sector at 24 times and in many cases, even close to 30. Our dividend yield is 4.7% and growing, well covered, higher than the S&P yield of 1.9% and the REIT average of 2.9%, and we have the potential to perform very well in an inflationary cycle.

Third quarter highlights from funds from operation starts with $1.18 billion or $3.13 per share. Our sales are over 2019 peak levels. Now we raised our guidance from $10.70 to $10.80 last quarter to $11.55 to $11.65 per share.

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An extensive list of these risks and uncertainties are identified in our annual report on Form 10-K for the fiscal year ended August 31, 2020, and other filings. Altogether, the team delivered core operating income of $277 million on revenue of $7.2 billion, creating a core operating margin of 3.8% for the quarter. For this year, we now anticipate core earnings per share to be in the range of $5.50 on revenue of $29.5 billion. But most importantly, we're maintaining our outlook of 4.2% for core operating margin and increasing our outlook for free cash flow by 5% to $630 million. In Q3, we saw continued strength with notable revenue upside during the quarter in mobility, cloud-connected devices, and semi-cap relative to our plan 90 days ago. Given the additional revenue, I'm particularly pleased with the strong leverage we achieved during the quarter, which enabled us to deliver a solid core operating margin of 3.8%, approximately 30 basis points higher than expected. Net revenue for the third quarter was $7.2 billion, approximately $300 million above the midpoint of our guidance range. On a year-over-year basis, revenue increased 14%. GAAP operating income was $240 million and our GAAP diluted earnings per share was $1.12. Core operating income during the quarter was $277 million, an increase of 61% year over year, representing a core operating margin of 3.8%, a 110-basis-point improvement over the prior year. Net interest expense in Q3 was $36 million and core tax rate came in at approximately 18%. Core diluted earnings per share was $1.30, a 251% improvement over the prior-year quarter. Revenue for our DMS segment was $3.6 billion, an increase of 21% on a year-over-year basis. Core margins for the segment came in at 3.9%, 140 basis points higher than the previous year. Revenue for our EMS segment also came in at $3.6 billion, reflecting strong year-over-year growth in our cloud and semi-cap businesses. Core margins for the segment were 3.8%, up 90 basis points over the prior year, reflecting solid execution by the team. Cash flows provided by operations were $585 million in Q3 and capital expenditures net of customer co-investments total $197 million. We exited the quarter with cash balances of $1.2 billion. We ended Q3 with committed capacity under the global credit facilities of $3.8 billion. With this available capacity, along with our quarter-end cash balance, Jabil ended Q3 with access to more than $5 billion of available liquidity, which we believe provides us ample flexibility. During Q3, we repurchased approximately 2.5 million shares for $130 million. At the end of the quarter, $124 million remain outstanding in our current stock repurchase authorization and we intend to complete this authorization during Q4 as we remain committed to returning capital to shareholders in FY '21 and beyond. DMS segment revenue is expected to increase 11% on a year-over-year basis to $3.95 billion. EMS segment revenue is expected to be $3.65 billion, a decrease of 2% on a year-over-year basis. We expect total company revenue in the fourth quarter of fiscal 2021 to be in the range of $7.3 billion to $7.9 billion for an increase of 4% on a year-over-year basis at the midpoint of the range. Core operating income is estimated to be in the range of $280 million to $340 million for a margin range of approximately 3.8% to 4.3%. Core diluted earnings per share is estimated to be in the range of $1.25 to $1.45. GAAP diluted earnings per share is expected to be in the range of $1 to $1.20. For FY '21, we expect core operating margins to be 4.2% on revenue of approximately $29.5 billion. This improved outlook translates to core earnings per share of approximately $5.50. And importantly, we now expect to deliver more than $630 million in free cash flow despite the stronger growth.

Altogether, the team delivered core operating income of $277 million on revenue of $7.2 billion, creating a core operating margin of 3.8% for the quarter. For this year, we now anticipate core earnings per share to be in the range of $5.50 on revenue of $29.5 billion. GAAP operating income was $240 million and our GAAP diluted earnings per share was $1.12. Core diluted earnings per share was $1.30, a 251% improvement over the prior-year quarter. We expect total company revenue in the fourth quarter of fiscal 2021 to be in the range of $7.3 billion to $7.9 billion for an increase of 4% on a year-over-year basis at the midpoint of the range. Core diluted earnings per share is estimated to be in the range of $1.25 to $1.45. GAAP diluted earnings per share is expected to be in the range of $1 to $1.20.

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Industrial supply chain constraints are having some impact on the timing of demand flowing through to sales, though solid execution and our favorable industry position, still drove an over 16% organic increase in sales versus prior year levels. Our teams are effectively managing through these issues to date, as reflected by our first quarter results, as well as our ability to increase operational inventory levels in the U.S. by 6% during the quarter. Consolidated sales increased 19.2% over the prior year quarter. Acquisitions contributed 2.1 percentage points of growth, and foreign currency drove a favorable 80 basis point increase. In many of these factors, sales increased 16.3% on an organic basis. As it relates to pricing, we estimate the contribution of product pricing on a year-over-year sales growth was around 140 basis points to 180 basis points in the quarter. On a two-year stack basis, segment organic sales were up nearly 2%, an improvement from fiscal '21 fourth quarter trends. Within our Fluid Power and Flow Control segment, sales increased 24% over the prior year quarter with acquisitions contributing 6.6 points of growth. On an organic basis, segment sales increased 17.4% year-over-year and 6% on a two-year stack basis. Gross margin up 28.6% declined 22 basis points year-over-year. During the quarter, we recognized LIFO expense of $3.6 million compared to $1.1 million of expense in the prior year quarter and a $3.7 million LIFO benefit in our fiscal '21 fourth quarter. The net vital headwind had an unfavorable 25 basis point year-over-year impact on gross margins during the quarter. Selling, distribution and administrative expenses increased 10.6% year over year, or approximately 7% on an organic constant currency basis. SG&A expense was 20.3% of sales during the quarter, down from 21.9% in the prior year quarter. Combined with improving sales and effective price cost management, EBITDA grew 31% year-over-year, while EBITDA margin of 9.9% was up 89 basis points over the prior year. Including reduced interest expense and a slightly lower tax rate, reported earnings per share of $1.36 was up 52% from the prior year. Cash generated from operating activities during the first quarter was $48.6 million, while free cash flow totaled $45 million or 85% of net income. During the quarter, we deployed a total of $36 million on share buybacks, debt reduction, dividends, and acquisitions. With regards to share buybacks, we repurchased nearly 77,000 shares for approximately $6.5 million. We ended September with just over $247 million of cash on hand and net leverage at 1.7 times adjusted EBITDA, which is below the prior year level of 2.1 times and the fiscal '21 fourth quarter level of 1.8 times. Our revolver remains undrawn with approximately $250 million of capacity and an additional $250 million accordion option. This includes earnings per share in the range of $5 to $5.40 per share based on sales growth of 8% to 10%, including a 7% to 9% organic growth assumption, as well as EBITDA margins of 9.7% to 9.9%. That said, as previously highlighted, LIFO expense year-to-date is running higher than our initial expectations, assuming fiscal Q1 LIFO expense levels of $3.6 million sustained for the balance of the year. This would result, in LIFO expense representing an approximate 40 basis point year-over-year headwind on EBITDA margins, compared to our initial expectation up 20 basis points to 30 basis points. Further, we expect SD&A expense will be flat, to up slightly on a sequential basis, compared to first quarter levels of approximately $181 million.

Consolidated sales increased 19.2% over the prior year quarter. Including reduced interest expense and a slightly lower tax rate, reported earnings per share of $1.36 was up 52% from the prior year. This includes earnings per share in the range of $5 to $5.40 per share based on sales growth of 8% to 10%, including a 7% to 9% organic growth assumption, as well as EBITDA margins of 9.7% to 9.9%.

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We generated $28.6 million of net income. Pretax pre-provision was $77 million with only one month of earnings from the acquired operations and loan originations were strong at $971 million for the quarter. Total deposits, excluding brokered and government, increased to $12.5 million. We still expect 35% earnings per share accretion to consensus estimates. The revised TBB at closing is estimated at 4%, lower than our original estimate. While cost savings are estimated at $48 million, we definitely work harder to see the areas that we can achieve more. We made a lot of progress on the first 45 days. In those 45 days, we completed the conversion and integration of the mortgage business, the insurance agency and several administrative functions. We also announced this month as part of the program -- as part of the synergies and integration, we announced a voluntary separation program that provides an opportunity for early retirement to approximately 160 employees of the combined institutions. Other potential synergies identified include the opportunity of consolidating eight to 10 branches. The $2.6 billion acquired loan portfolio definitely complements ours nicely and the deposit books improves our funding. Now the loan-to-deposit ratio stands at 78%. Importantly, to support this economy, there is still over $60 billion of pandemic and hurricane relief. Recent numbers as of August are 92% of August 2019. From the perspective of our client base, 100% of our corporate clients are operating and close to 99% of the business banking clients have reopened well. Our hotel portfolio, it's below typical occupancy level and San Juan airport traffic is low, closer to 50%. Our active moratoriums were reduced to only 0.8% of the portfolio, less than 1%. I think so far the post-moratorium payment performance is positive with 98% of commercial clients current and 94% of retail as of October 21. Those are being evaluated under the potential modification of terms provided by the Section 14 of the CARES Act. As Aurelio made reference to, net income for the quarter was $28.6 million or $0.13 a share compared to $21 million last quarter. If we break down the components, you can see that corporation's legacy core business achieved a net income of $44.3 million, which mostly it's a result of reductions in the required provision for credit losses. Last quarter, we had a provision of $39 million as compared to $8 million this quarter. The acquired Santander operation contributed $3.5 million of after-tax net income. For example, one of -- few other things that had impact -- if we look at the investment portfolio, Santander had a U.S. treasuries -- a large U.S. treasuries portfolio that after March resulted in a portfolio of yields only 15 basis points. Since then, we decided that to improve margin to sell this portfolio and reinvest it in other securities according to our policies, which yield around 94 basis points, which will improve going forward some of the yield. On the other hand, amortization of some of the other discounts and intangibles resulted in about $1 million improvement in net interest income from the combination of loan and deposit, preliminary fair value adjustments that have been booked. This resulted in a recognition of an allowance of almost $39 million for the quarter in addition to those fair value marks. The non-purchased credit deteriorated portfolio, it's about $1.7 billion after marks. During the quarter, we also decided to sell around $160 million of MBS that were experiencing significant prepayments, and that resulted in a gain of about $5.1 million from the transaction and it's being reinvested again in other instruments. During the quarter, we had $10.4 million, which compares to $2.9 million in the last quarter, which was mostly legal and financial consulting piece as well as some conversion-related cost as we prepare for the conversion. So far, we have incurred about $25 million in expenses related to the transaction over the last few quarters. We did have an analysis -- completed an analysis of the DTA now including the Santander operation, and that resulted in the reversal of approximately $8 million of deferred tax asset valuation allowance we had on the books. Net interest income for the quarter was $148.7 million, which is $13.5 million higher than last quarter. $14 million of that was the Santander operation. On the other hand, the legacy FirstBank operation had a reduction of $500,000 in interest income as compared to last quarter. Last quarter, we had 4.22% of NIM that you saw in our prior release. That number is down to about 3.94% this quarter. Commercial loan repricing was about four basis points of the reduction, but the much higher proportion of cash and investment securities as well as the large prepayments and the alternative for reinvestment affected by 18 basis points more that margin. Santander on a stand-alone was about -- the margin was about 3.89% considering the purchase accounting adjustments, and that combined with FirstBank ended up with a 3.93% margin that you see on the release. Noninterest income improved to $29.9 million. The $9 million -- this $9 million increase includes $5 million in the gains on sales that I made reference to before, of securities that I made reference to. We had $3.4 million increase in revenue from mortgage banking activities. This quarter, we had a much active -- much more active quarter on originations than what we had in the second quarter and ended up selling $98 million more in conforming paper than we did last quarter resulting in that revenue increase. Also, the reopening of businesses, as we have seen on the quarter, seen a much higher level of credit and debit card activity, which improved -- that includes ATM, merchant fees and some of the other components, that improved fee income by about $2.8 million in the quarter. And then the improvement we had in deposit service fees associated with the Santander transaction that brought in $1.1 million of additional deposit fees to the operation. On the expense side, expenses were $107 million. That includes $10.7 million in expenses for the acquired Santander operation and a $96.8 million for the FirstBank legacy operation. This $96 million is $7 million higher than the 89 -- almost $90 million we had last quarter. As I mentioned, the merger and restructuring costs for the quarter were $10.4 million, which is $7.5 million higher than last quarter, basically created most of the increase. But in the quarter, we -- if we exclude this, FirstBank was $86.4 million of expenses. COVID-related expenses were about $1 million this quarter, which is down about $2 million from last quarter. As of September 30, the allowance for loans and leases only was up $65 million to $385 million as compared to June. If we look at total allowance for credit losses including unfunded commitments and debt securities, that's up to $403 million. This quarter, as I mentioned before, we recorded about $38 million in allowance for credit losses in total. $37.5 million of that is related to loans. And in addition, for PCD loans or purchased credit deteriorated specifically, we established a 20 -- almost $29 million allowance, which represents the fair value marks on this loan, which CECL requires that -- what is commonly referred to as a gross up, that the loans represented gross and the discount represented in the allowance. Those two combined were about $65 million. The ratio of the allowance for credit losses on loans -- to total loans was 3.25% at September, slightly down from 3.40% we had at June, but a very significant coverage if we consider that we added a large amount of portfolios, that a large part of it is also mark-to-market and fair value mark-to-market and has been discounted. On a non-GAAP basis, if we exclude the PPP loans, which don't carry much reserve, the ratio of the allowance to total loans was 3.38% as compared to 3.55% last quarter. Non-performance are down $10.5 million, $293 million. Most of the reduction happened on the OREO portfolio, which decreased $7.3 million. The inflows were $18.4 million this quarter, which is $10 million higher than last quarter. As you can see, even with the impact of the acquisition, we still have Tier one ratios of 17%. You see it's about 13% for the quarter. If we were to normalize and assume the full quarter of average assets, that ratio will be closer to 11%, just over that.

As Aurelio made reference to, net income for the quarter was $28.6 million or $0.13 a share compared to $21 million last quarter. Net interest income for the quarter was $148.7 million, which is $13.5 million higher than last quarter.

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We achieved this goal as we now have 37 of our 39 wholly owned hotels open and operational with the two remaining closed hotels under contract for sale. Of the 28 comparable hotels that were open throughout the third quarter, 21 of these hotels broke even on the GOP line with nine achieving EBITDA breakeven levels. Our Sanctuary Beach Resort was the best performing asset again during the third quarter, ending the period at 81% occupancy with a $570 ADR, which led to 16% RevPAR growth. Success continued in October, despite worries that leisure travel would subside after Labor Day as the resort grew RevPAR by 22% aided by 55% ADR growth and 70% occupancy. Down the California coast, the hotel Milo in Santa Barbara continued its momentum from the second quarter and finished the summer on a strong note with third quarter ADR in line with last year, aided by a very strong September, which saw 70% occupancy and 11% ADR growth. We have been able to win market share and saw an occupancy bump of 1500 basis points versus August for our South Florida portfolio and that momentum continued into October, as our portfolio occupancy grew another 500 basis points for the month. Rates around the holiday week between Christmas and New Year's are already in line with last year and with a strong 30% occupancy already on the books across our South Florida portfolio, we believe demand will continue to pick up as we move through the holiday season. Pre-COVID our resorts portfolio, all the drive-to from one of our gateway market clusters contributed 25% of our EBITDA. 75% of our portfolio remains gateway urban markets. During President Obama's second inauguration in 2013, our portfolio generated 23% RevPAR growth during the quarter. In the first quarter of 2017, following President Trump's inauguration, our portfolio RevPAR grew by 15% with 57% growth on the night of the inauguration. 20% of New York's total hotel room count, about 25,000 keys could permanently close and every week we seem to be seeing this forecast come to fruition with another permanent closure. Industry experts believe this could equate to more than 13,000 rooms. Year-to-date through September, 211 projects in the US representing 56% decrease in the pipeline over the same period last year. These are staggering figures that could continue to increase as our industry works through the recovery and even mirror the great financial crisis when the supply pipeline declined from a peak of 212,000 rooms at the end of 2007 to 50,000 rooms in early 2011. As a quick reminder we have announced accretive binding sales agreements on four assets in our portfolio with total expected net proceeds of $70 million. New Castle County of Delaware is acquiring the hotel for an additional $19.5 million in proceeds. This is about a 2% cap on 2019. These first five transactions are all smaller, non-core hotels and we are pleased with the pricing within 10% to 20% of pre-COVID values and at a combined 21 times EBITDA multiple on 2019. Across the last 90 days, even before the election or the vaccine, there has been a meaningful improvement in the availability of debt for higher quality, lower cash burn hotels. Due to our focused service strategy we were able to comfortably restart our hotels with the confidence that we can attain GOP breakeven levels within 45 days of reopening. During July, 21 of our 28 open hotels broke even on the GOP line. This increased to 22 hotels in August and 25 hotels in September. Once again during July, nine of our 28 open hotels achieved break-even EBITDA levels which increased to 11 hotels in August and 16 in September. Our model allows us the flexibility to continue to operate our hotels at current staffing levels at our break-even occupancies approximating 35% all the way up to 55% and even 60% at some of our hotels. With our open portfolio generating 37% occupancy in the third quarter, we estimate that revenue from the next 20 percentage points of occupancy gains should drop down to the GOP line at 75% to 80% flow-through, generating outsized margin gains and highlighting the operating leverage inherent in our portfolio. We estimate that many of these changes will lead to a 10% reduction in housekeeping labor and our preoccupied room cost for items such as breakfast and in-room amenities. As an example, we currently maintain an average FTE count at our hotels of 21 employees versus 60 FTEs in February of 2020. Employee counts will increase as occupancies rise but changes in our operating model should allow for additional labor cost reductions in the 5% to 8% range leading to sustainable margin expansion of 150 basis points to 200 basis points post-pandemic. Our property level cash burn ended the second quarter at $3.4 million and decreased sequentially over the balance of the third quarter with a $2.5 million cash loss on property in July and ending September with a $1.7 million property level cash loss. This brought total property level cash burn for the third quarter to $5.7 million, 25% below our forecast at the beginning of the period. At the beginning of the pandemic, our corporate level cash burn which includes all hotel operating expenses, corporate SG&A and debt service was originally projected to be $11 million per month. Our corporate level burn rate steadily declined over the six-month period ending in September reducing from $10.5 million for April to $6.6 million for July and ending the third quarter with a $5.9 million burn rate in September. Our corporate cash burn for the third quarter totaled $18.2 million, 32% below our second quarter burn rate and 27% below our initial downside scenario forecast. Based on this quarter's results and our forecast for the fourth quarter, we are comfortable that on a property level basis our entire portfolio breaks-even with a 65% RevPAR decline with occupancies approaching 35% to 40% and a 25% to 30% ADR decrease. At the corporate level, our RevPAR breakeven occurs at a 45% RevPAR decline factoring in 55% to 60% occupancies at a 20% ADR discount. During the fourth quarter, we expect to collect insurance proceeds between $7 million and $8 million which will be recorded in our fourth quarter results. During the third quarter we spent $5.4 million on capital projects bringing our year-to-date spend to $21.8 million. We anticipate a significantly reduced capex load for 2021, primarily focused on maintenance capex and life safety renovation, roughly 40% below our 2020 spend. Since 2017, we've allocated close to $200 million for product upgrades and ROI generating capital projects across more than 50% of our total room count. As of November 1, we've drawn $126 million of our $250 million senior credit facility and ended the quarter with $20.2 million in cash and deposits. We remain in constant contact with suppliers of the four assets that we announced earlier this year and we recently granted the buyer of the Dwayne Street hotel an extension before in the first quarter of 2021 and this resulted in our receipt of an additional deposit of $500,000 for the transaction. Over the past week we went under contract for sale for the Sheraton Wilmington in Delaware for $19.5 million and we've received a material hard deposit from the buyer. We anticipate this sale will close before the end of 2020. As we enter the final months of this unprecedented year for our company and our industry, we look toward our pillars of strength to navigate our passport, our unique owner operator relationship which has yielded significant expense savings over the past nine months, our cluster strategy which maximizes revenues and economies of scale while capturing unique demand opportunities in our market and the more than 20 years of experience in the public markets as a team for Jay, Neil and I. All the while we continue to explore various opportunities to fortify our balance sheet, to give the portfolio extensive runway as we navigate toward stabilized demand over the next several years.

We anticipate this sale will close before the end of 2020.

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We have delivered strongly for our clients over the past 17 months advising them on their most important strategic, financial and capital requirements during one of the most uncertain and volatile periods of our lifetimes. That said, we have learned a lot about operating flexibly over the past 17 months, and we are committed to integrating more flexible work arrangements into the way we work going forward. The total dollar volume of announced M&A increased 17% sequentially as the number of transactions increased 7% and the average deal size increased 10%. In fact, the second quarter represents the fourth straight quarter to surpass up $1 trillion in announced M&A activity and the first time ever the trailing 12 months activity exceeded $5 trillion. Second quarter adjusted net revenues of $691.2 million grew 34% year-over-year. Year-to-date, adjusted net revenues of $1.36 billion increased 43% compared to the prior year period. Second quarter advisory fees of $561.4 million grew 67% year-over-year. Year-to-date advisory fees of $1.07 billion increased 54% versus the prior year period and represent the first time that we have exceeded $1 billion in advisory revenues for the first half of the year. Our trailing 12-month advisory fees exceeded $2 billion for the first time in our history. Based on current consensus estimates and actual results, we expect to maintain our number 4 ranking in advisory fees among all publicly traded investment banking firms for the last 12 months and to grow our market share relative to these firms. In the first half of the year, we also continued to narrow the gap between Evercore and the number 3 ranked firm in terms of trailing 12 months advisory fees. Second quarter underwriting fees of $48 million declined 49% year-over-year, but excluding two sizable fees during the second quarter of 2020, one from PNC BlackRock and one from Danaher, underwriting fees were essentially flat year-over-year. Year-to-date, underwriting fees of $127.3 million increased 11% versus the prior year period, even including the PNC BlackRock and Danaher fees. Second quarter commissions and related revenue of $50.7 million declined 7% year-over-year as both volumes and volatility were lower relative to the elevated levels in the second quarter of 2020. Year-to-date commissions and related revenues of $104.3 million declined 5% versus the prior year period. Year-to-date revenues are 6% higher than the first half average of the prior three years, which includes the extreme volatility during the first half of last year. Second quarter asset management and administration fees of $19 million increased 25% year-over-year as quarter end AUM were $11.1 billion, an increase of 23% year-over-year, principally related to positive investment performance and market appreciation. Year-to-date asset management and administration fees of $36.8 million increased 21% versus the prior year period. Our adjusted compensation ratio for the second quarter and year-to-date is 59%. Second quarter noncompensation costs of $73.1 million declined 5% year-over-year. Our noncompensation ratio for the second quarter is 10.6%. Year-to-date noncompensation costs of $145.8 million declined 9% versus the prior year period, and Bob will comment more on noncomp expenses in his remarks. Second quarter adjusted operating income and adjusted net income of $210 million and $154 million increased 105% and 115%, respectively. Year-to-date adjusted operating income and adjusted net income of $412 million and $316.5 million increased 122% and 144%, respectively. We delivered a second quarter operating margin of 30.4% and second quarter adjusted earnings per share of $3.17, an increase of 107% year-over-year. Year-to-date adjusted margin is 30.3% and adjusted earnings per share of $6.47 increased 136% versus the prior year. We returned $221 million to shareholders during the quarter through dividends and the repurchase of 1.4 million shares. Year-to-date, we returned nearly $500 million through dividends and the repurchase of 3.3 million shares, a record level of capital return for our shareholders. Our dividend -- our Board declared a dividend of $0.68. We sustained our number 1 league table ranking in dollar volume of announced M&A transactions in the U.S. among independent firms for the 12-month period ending June 30. We achieved a third straight quarter of advisory revenues greater than $500 million. And as Ralph mentioned, we surpassed $1 billion in the first half advisory revenues for the first time with strong contribution across capabilities globally, including M&A, capital advisory and strategic defense and shareholder advisory. We have prominent roles on some of the biggest announcements of the year, including serving as the lead advisor to Grab on its $40 billion SPAC merger, the largest SPAC merger in history and serving as the sole advisor to Nuance on its pending $19.7 billion sale to Microsoft. Our industry-leading strategic defense and shareholder advisory team continues to be extremely busy and is currently advising companies representing $1.5 trillion in market value in activist defense. We participated in a number of significant transactions across a variety of sectors during the second quarter, including 31 transactions that raised nearly $10 billion in total proceeds across seven sectors. And of the ECM transactions that we participated in during the quarter, 60% were as an active bookrunner, including in consumer lead left bookrunner on Post Holdings SPAC; in biopharma active bookrunner on Centessa Pharmaceuticals IPO; and in e-commerce active bookrunner on 1stDibs IPO. As we mentioned last quarter, our investments in our ECM platform have earned us a place in the top 20 for underwriting revenue as estimated by Dealogic for the 12-month period ending June 30 for deals listed on the U.S. exchanges, excluding bought deals. We are focused on strategically gaining share and working our way toward the top 10, which is currently comprised of banks that use their balance sheets to win underwriting business. Finally, assets under management and our Wealth Management business finished the quarter at $11.1 billion as long-term performance remains solid and net new business continued to be positive. We also have more than 30 SMDs on our platform that have either joined or been promoted within the last three years that represent additional opportunities for growth as they continue to ramp to our high levels of productivity. For the second quarter of 2021, net revenues, net income and earnings per share on a GAAP basis were $688 million, $140 million and $3.21, respectively. Year-to-date, net revenues, net income and earnings per share on a GAAP basis were $1.35 billion, $285 million and $6.46, respectively. The settlement resulted in a gain of $4.4 million, which we have excluded from our second quarter 2021 adjusted net revenues. Our GAAP tax rate for the second quarter was 22.1% compared to 24.5% in the prior year period. Year-to-date, our GAAP tax rate is 19.2% compared to 25% in the prior year period. On a GAAP basis, the share count was $43.7 million (sic) [43.7 million] for the quarter and $44.1 million (sic) [44.1 million] for the first half. Our share count for adjusted earnings per share was 48.5 million for the quarter and 49 million for the first half. Firmwide noncompensation costs per employee were approximately $39,000 for the second quarter, down 8% on a year-over-year basis. This level of noncompensation costs per employee contrasts to our 3-year quarterly average measured from 2017 to 2019 of approximately $47,000 per employee. We do expect, however, some cost efficiency as we move forward as we utilize the technologies that enabled us to work so effectively over the past 16 months. As of June 30, we held $1.5 billion in cash and cash equivalents and investment securities, up from the prior quarter as our balance sheet grows throughout the year, as we accrue for compensation obligations that will be paid in the first quarter of next year. The past 14 years as the CFO of Evercore have been an exciting and challenging journey.

Our dividend -- our Board declared a dividend of $0.68. For the second quarter of 2021, net revenues, net income and earnings per share on a GAAP basis were $688 million, $140 million and $3.21, respectively.

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While Q3 organic sales declined slightly, we still expect to deliver organic sales growth in 2021 at the high end of our 100 to 200 basis points annual target on top of the 4% organic growth we generated in 2020. We estimate that the constraints in supply and labor markets resulted in approximately $25 million in delayed sales in the third quarter. We delivered strong adjusted EBITDA growth of $284 million, up 14% year-over-year. EBITDA growth was driven by positive price realization of $53 million and favorable net performance of $79 million, which offset unprecedented commodity input cost inflation of $88 million experienced in the quarter. Approximately $650 million in pricing initiatives have been implemented and will be recognized over the 2021 and 2022 time horizon. 10 months earlier we have been pursuing the required regulatory approvals for the AR Packaging acquisition we announced in May of this year. Turning now to Slide 4, you will see the innovation powerhouse that the combination of AR Packaging will create where the large distributed footprint of AR Packaging, it's 25 converting facilities across Eastern and Western Europe add significant scale and cost-efficiency benefits. We have executed $63 million, a positive price that is flowing through the business over the first nine months of 2021, and we expect to realize approximately $77 million of positive pricing during the fourth quarter. We're currently targeting $510 million of pricing in 2022 based on implemented and recognized pricing initiatives. In total, at this point, we expect to execute approximately $650 million in price actions over the 2021 and 2022 time horizon. We surpassed our net organic sales growth goal in 2020 delivering 4% growth, and we expect to deliver at the high end of our targeted 100 to 200 basis points goal this year. Notably, this year's expected net organic growth of approximately 200 basis points reflects growth on top of the very strong growth we drove in 2020. Net organic sales have experienced growth of 2% compared to the same period in 2020, and the two-year compounded annual growth rate for organic sales since 2019 is 3%. Net sales increased 5% or $84 million from the prior year period to $1.8 billion. Adjusted EBITDA increased 14% to $284 million resulting in an improved adjusted EBITDA margin of 15.9%. Adjusted earnings per share grew 31% to $0.34 a share. Finally, our integration rate increased to 73% as we continue to internalize all paperboard into our converting operations. On Slide 10 and 11, you'll see our revenue and EBITDA waterfalls. The drivers of the 5% year-over-year increase in sales were $53 million in pricing, $20 million of higher volume mix and $11 million of favorable foreign exchange. Adjusted EBITDA increased $34 million or 14% year-over-year to $284 million in the third quarter versus the prior year period. Adjusted EBITDA growth was driven by $53 million in price, $3 million in volume mix, and $79 million in improved net productivity. Adjusted EBITDA was unfavorably impacted by $88 million of commodity input cost inflation, and $13 million of labor, benefits, and other inflation. Our foodservice business continue to recover from last year, growing 11% year-over-year. Our food, beverage, and consumer sales improved 3% including acquisitions. 9 point to $25 million in delayed sales resulting from supply chain and labor market constraints during the quarter. CRB was 95% while SBS improved sequentially and was 96% at the end of the quarter. Our CUK operating rate continue to be well about 95%. We ended the quarter with net leverage of 3.97 times. We have clear line of sight to bring leverage down to 3.5 times or lower at the end of 2022, after leverage peaks in the fourth quarter due to the financing for AR Packaging acquisition. Global liquidity was $1.8 billion at the end of the third quarter. Importantly, after we found and complete the AR Packaging acquisition, our global liquidity will remain substantial with approximately $1 billion available. 2021 adjusted EBITDA is projected to be in a range of $1.04 billion $1.06 billion. We anticipate cash flow will be in the range of $100 million to $150 million for the year. In the guard rails we provided last quarter for adjusted EBITDA in the $1.4 billion-plus range. AR Packaging and Americraft are expected to contribute $160 million and $30 million before synergies respectively. For the base business, it is reasonable to assume at least $20 million from our traditional EBITDA drivers of volume mix and net performance, more than offsetting labor, benefits, other inflation, and FX. The first $50 million of incremental EBITDA from our Kalamazoo project and a minimum recovery of $170 million of 2021 price cost dislocation provided a clear step-change higher to adjusted EBITDA of $1.4 billion-plus in 2022. The material EBITDA growth and cash flow generation projections give us line of sight to year-end 2022 leverage at 3.5 times or lower.

While Q3 organic sales declined slightly, we still expect to deliver organic sales growth in 2021 at the high end of our 100 to 200 basis points annual target on top of the 4% organic growth we generated in 2020. Approximately $650 million in pricing initiatives have been implemented and will be recognized over the 2021 and 2022 time horizon. In total, at this point, we expect to execute approximately $650 million in price actions over the 2021 and 2022 time horizon. We surpassed our net organic sales growth goal in 2020 delivering 4% growth, and we expect to deliver at the high end of our targeted 100 to 200 basis points goal this year. Notably, this year's expected net organic growth of approximately 200 basis points reflects growth on top of the very strong growth we drove in 2020. Net sales increased 5% or $84 million from the prior year period to $1.8 billion. Adjusted earnings per share grew 31% to $0.34 a share. Importantly, after we found and complete the AR Packaging acquisition, our global liquidity will remain substantial with approximately $1 billion available.

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For the first quarter of 2021, Tennant reported net sales of $263.3 million, up 4.4% year-over-year, which included a favorable foreign currency effect of 3% and a divestiture impact of negative 1.7%. Organic sales, which exclude the impact of currency and divestitures increased 3.1%. In the first quarter, sales in the Americas declined 3%, reflecting the divestiture of the Coatings business earlier this year, which impacted results by negative 2.6%, along with a foreign currency effect of negative 0.8%. Organically, the region grew 0.4%, reflecting the limited impact that the pandemic had on the prior year period, as well as solid growth in the direct and distribution channels in North America, along with growth in Brazil. Sales in the EMEA region increased 12.4% or 2.3% organically, driven by performance in France, Italy and Germany and also benefited from a foreign currency effect of 10.1%. Sales in the Asia Pacific region rose 40.6% with a foreign currency effect of positive 8.8%. On an organic basis, sales in the region rose 31.8%. Gross margin in the first quarter of 2021 was 43%, compared to 40.8% in the prior year period. Adjusted gross margin was 43%, compared to 41.5% in Q1 of last year. As far as expenses, during the first quarter, our adjusted S&A expenses were 30.2% of net sales, compared to 31.8% in the year-ago period. Net income increased to $25.7 million, or $1.37 per diluted share, compared to $5.2 million, or $0.28 per diluted share in the year-ago period. Adjusted EPS, which excluded non-operational items and amortization expense was a $1.17 per share, compared to $0.57 per share in the year-ago period. Adjusted EBITDA in the first quarter of 2021 increased to $40.7 million, or 15.5% of sales, compared to $26.1 million, or 10.4% of sales in the first quarter of 2020. As for our tax rate, in the first quarter, Tennant had an adjusted effective tax rate, excluding the amortization expense adjustment of 21.4%, compared to 20.5% in the year-ago period, which increased primarily due to the mix in full-year taxable earnings by country, and a decrease in certain discrete tax benefit items. Turning to cash flow and balance sheet items, Tennant generated $18.4 million in cash flow from operations in the first quarter of 2021, mainly due to strong business performance. As of March 31, 2021, the Company had $175.2 million in cash and cash equivalents. This restructure allowed for enhanced flexibility with minimal covenants and no prepayment penalties, while also reducing future interest expense by approximately $1 million per month. As included in today's earning announcement, our guidance for full-year 2021 is as follows: net sales of $1.09 billion to $1.11 billion with organic sales rising 9% to 11%; GAAP earnings per share of $3.45 to $3.85 per share; adjusted earnings per share of $4.10 to $4.50 per share, which excludes certain non-operational items and amortization expense; adjusted EBITDA in the range of $140million to $150 million; capital expenditures of $20 million to $25 million; and an adjusted effective tax rate of approximately 20%, which excludes the amortization expense adjustment.

For the first quarter of 2021, Tennant reported net sales of $263.3 million, up 4.4% year-over-year, which included a favorable foreign currency effect of 3% and a divestiture impact of negative 1.7%. Net income increased to $25.7 million, or $1.37 per diluted share, compared to $5.2 million, or $0.28 per diluted share in the year-ago period. Adjusted EPS, which excluded non-operational items and amortization expense was a $1.17 per share, compared to $0.57 per share in the year-ago period. As included in today's earning announcement, our guidance for full-year 2021 is as follows: net sales of $1.09 billion to $1.11 billion with organic sales rising 9% to 11%; GAAP earnings per share of $3.45 to $3.85 per share; adjusted earnings per share of $4.10 to $4.50 per share, which excludes certain non-operational items and amortization expense; adjusted EBITDA in the range of $140million to $150 million; capital expenditures of $20 million to $25 million; and an adjusted effective tax rate of approximately 20%, which excludes the amortization expense adjustment.

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Earlier today, we announced adjusted earnings of $0.17 per share for the 2021 third quarter, which excludes a onetime noncash charge totaling $4.58 per share related to our coastal marine business. On a GAAP basis, we reported a net loss of $4.41 per share. Vehicle miles traveled in the U.S. declined, including an overall 4.4% decline in August, with all regions of the U.S. impacted. At the height of the storm, more than two million barrels of refinery capacity per day was offline, reducing PADD three refinery utilization from 93% in August to 79% in September. In the petrochemical sector, with nearly the entire complex shut down operating rates at nameplate ethylene plants in the Southeast -- excuse me, in Southeast Louisiana declined from 89% in August to 24% in September, and production fell as much as 75% compared to August. It's been estimated that as many as 2,000 dry cargo and tank barges were damaged during the storm, which included 30 Kirby tank barges. Overall, we estimate the damage caused by the hurricane on our equipment directly contributed to lost revenue and additional costs totaling approximately $0.08 per share during the third quarter. More importantly, we took significant actions to improve our coastal business, including the sale of our Marine Transportation assets in Hawaii and the retirement of 12 laid-up wire tank barges and four tugboats in the coastal fleet. This growth contributed to 25% sequential growth in oil and gas revenues and positive operating margins for the first time in more than two years. The good news is that we have seen a significant improvement in inland market fundamentals in recent weeks, with increasing customer demand and higher barge utilization in the high 80% range. During the third quarter, we sold our coastal Marine Transportation assets in Hawaii, including four tank barges and seven tugboats for cash proceeds of $17.2 million. We also retired 12 wire tank barges and four tugboats, which had limited customer acceptance and low utilization. These events resulted in a noncash impairment charge of $121.7 million. As a result, the company concluded that a triggering event had occurred and performed interim quantitative impairment test on coastal goodwill, which resulted in a noncash impairment charge totaling $219 million. In total, the company recorded a noncash impairment related to coastal marine equipment and associated goodwill totaling $340.7 million before tax, $275 million after tax or $4.58 per share. In the third quarter, Marine Transportation revenues were $338.5 million with an operating income of $16.9 million and an operating margin of 5%. Compared to the 2020 third quarter, marine revenues increased $17.9 million or 6%, primarily due to higher fuel rebuilds in inland and coastal as the average cost of diesel fuel had increased 76%. Operating income declined $15.5 million primarily due to Hurricane Ida, lower term contract pricing and increased maintenance. Compared to the 2021 second quarter, marine revenues increased $5.6 billion or 2% due to modest improvements in coastal barge utilization and increased fuel rebuilds. Operating income declined $1.6 million as a result of sales mix, increased horsepower costs and the impact of Hurricane Ida. During the quarter, the inland business contributed approximately 76% of segment revenue. Average barge utilization was in the low 80% range, which was slightly down compared to the second quarter, but improved compared to the low 70% range in the 2020 third quarter. Long-term inland Marine Transportation contracts or those contracts with a term of one year or longer contributed approximately 65% of revenue, with 56% from time charters and 44% from contracts of affreightment. Compared to the 2020 third quarter, inland revenues were up 3% due to significant increases in fuel rebuilds and improved barge utilization, offset by lower average pricing on term contracts. Overall, the inland market represented 76% of segment revenues and had an operating margin in the mid- to high single digits. In coastal, spot market conditions improved modestly, resulting in barge utilization in the mid-70% range during the quarter. During the third quarter, the percentage of coastal revenues under term contracts was approximately 80%, of which approximately 85% were time charters. Revenues in coastal increased 4% sequentially and 13% compared to the 2020 third quarter, primarily due to higher fuel rebuilds and modest increases in spot market activity. Overall, coastal represented 24% of Marine Transportation segment revenues and at a negative operating margin in the low single digits. Revenues for the 2021 third quarter were $260.4 million, with an operating income of $11 million and an operating margin of 4.2%. Compared to the 2020 third quarter, Distribution and Services revenue increased $84.4 million or 48%, and operating income improved $9.9 million. Compared to the 2021 second quarter, revenues increased $33.7 million or 15%, and operating income increased $4.9 million. During the third quarter, commercial and industrial revenues increased 9% sequentially and 20% year-on-year. Overall, the business represented approximately 59% of segment revenue and had an operating margin in the mid-single digits. During the third quarter, oil and gas revenues increased 25% sequentially and 120% year-on-year. Overall, the oil and gas-related businesses represented approximately 41% of segment revenue and had an operating margin in the low to mid-single digits. As of September 30, we had $54 million of cash and total debt of $1.21 billion, with a debt-to-cap ratio of 29.8%. Since the Savage acquisition of April 1, 2020, we have repaid nearly $500 million in debt. During the quarter, we generated strong cash flow from operations of $83 million, net of capital expenditures of $34 million. Free cash flow was $49 million. We also sold assets with net proceeds of $22 million during the quarter, primarily composed of coastal marine assets in Hawaii. At the end of the quarter, we had total available liquidity of $908 million. As of this week, our net debt has been further reduced to $1.2 billion. For the full year, we expect capital spending to be approximately $120 million to $130 million, which represents more than a 15% reduction compared to 2020 and is primarily composed of maintenance requirements for our marine fleet. We also expect to generate free cash flow of $250 million to $290 million for the full year. Lastly, from a tax perspective, we expect an effective tax rate of approximately 29% in the fourth quarter. During October, our barge utilization has been in the mid-80% to high 80% range, with recent utilization at the high end of that and in the high 80s. Overall, inland revenues are expected to sequentially increase in the fourth quarter, with operating margins improving to around 10%. The recent retirement of the wire barge marine equipment will result in coastal barge utilization being around 90% for the fourth quarter. In inland, our barge utilization has recently touched 90%, with October averaging in the mid- to high 80% range. In coastal, although market conditions remain challenging, recent improvements in the spot market should lead to barge utilization around 90%.

Earlier today, we announced adjusted earnings of $0.17 per share for the 2021 third quarter, which excludes a onetime noncash charge totaling $4.58 per share related to our coastal marine business. On a GAAP basis, we reported a net loss of $4.41 per share. For the full year, we expect capital spending to be approximately $120 million to $130 million, which represents more than a 15% reduction compared to 2020 and is primarily composed of maintenance requirements for our marine fleet.

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We had a very strong third quarter, highlighted by outstanding P&C premium revenue growth globally of 17% and simply excellent underwriting results on both the calendar and current accident year basis, despite elevated catastrophe losses. Core operating income in the quarter of $2.64 per share was up 32% with $250 million over prior year to $1.2 billion, while net income of $1.8 billion was up 53% from prior year. Yet, with over $1.1 billion of cats, we reported a 93.4% combined ratio with P&C underwriting income up 58% to $617 million, which speaks to the underlying strength of our businesses, and again, broad diversification of our company's sources of revenue and earnings, both domestically and globally. Year-to-date, we have produced $2.4 billion in underwriting income for a combined ratio of 90.4% and that includes $2.1 billion of cat losses, and what is shaping up to be another year of sizable weather-related loss events kind of the new normal brought on by climate change and other societal changes. Speaking again to our underwriting health, on a current accident year ex-cat basis, underwriting income in the quarter was $1.4 billion, up 23% with a combined ratio of 84.8% compared to 85.7% prior year, a quarterly underwriting record. If we exclude the one-time positive adjustment we took last year due to lower frequency of loss because of the COVID-related shutdown, our current accident year combined ratio unaffected improved 2 points. The strength of our balance sheet and conservative approach to loss reserving was again in evidence this quarter as we reported $321 million in favorable prior period reserve development. Net investment income in the quarter was $940 million, up 4.5%. As I said at the opening, P&C premiums were up nearly 17% globally or 15.5% in constant dollar with commercial premiums up 22% and consumer up 4%. The 17% growth for the quarter and 14.2% for the first nine months, topped last quarters and was the strongest organic growth we have seen again since 2004. In North America, total P&C net premiums grew over 17% with commercial premium up about 22.5% excluding agriculture, which had a fantastic quarter in its own right with premium growth of over 40%, commercial P&C premiums were up over 16.5% in North America. New business was up 13% for all commercial lines and renewal retention remained strong at over 97% on a premium basis. The 16.5% commercial premium growth is a composite of 15.5% growth in our major accounts and specialty business and over 18% in our middle market and small commercial business, simply a standout quarter for this division. Overall, rates increased in North America commercial lines by over 12%. Once again, loss costs are currently trending about 5.5% and vary up or down, depending upon line of business. And again, like last quarter, just to remind you, in general, commercial lines loss costs for short-tail classes are trending around 4% though we anticipated this to increase in the future while long-tail loss costs excluding comp are trending about 6%. In major accounts, which serves the largest companies in America rates increased in the quarter by just over 13%. Risk management-related primary casualty rates were up over 6%. General casualty rates were up about 21% and varied by category of casualty. Property rates were up 12% and financial lines rates were up 17%. In our E&S wholesale business, rates increased by 16% in the quarter, property rates were up 13%, casualty was up 20% and financial lines rates were up about 21%. In our middle market business, rates increased in the quarter nearly 9.5%. Rates for property were up over 11%. Casualty rates were up about 9.5% excluding workers' comp with comp rates down 2% and financial lines rates were up 18%. Commercial P&C premiums grew 20.5% on a published basis or 16% in constant dollar. International retail commercial P&C grew nearly 17% or 12% in constant dollar, while our London wholesale business grew over 31%. Retail commercial P&C growth varied by region with premiums up almost 28% in our European Division, Asia Pacific was up 15.5%, while Latin America commercial lines grew about 6.5%. In our international retail commercial P&C business, rates increased in the quarter by 15%, property rates were up 11%, financial lines up 33% and primary and excess casualty up 7% and 11% respectively. And in our London wholesale business rates increased in the quarter by 11%, property up 13%, financial lines up 14%, marine up 8%. Outside North America, loss costs are currently trending about 3% though that varies by class of business and country. Our international consumer business grew almost 10% in the quarter on a published basis or 5% in constant dollar, and breaking that down a little further, international personal lines grew almost 11% on a published basis, while international A&H grew over 8.5% or just 5% in constant dollar. Latin America had a particularly strong quarter in consumer with personal lines and A&H premiums up 18.5% and 17.5% respectively, powered by both our traditional and digitally focused distribution relationships. Net premiums in our North America high net-worth personal lines business were up just over 1%, adjusted for non-renewals in California and COVID related auto-renewal credit, we grew 3% in the quarter. Our true high net-worth client segment, the heart of our business, grew 11% in the quarter. Overall, retentions remained strong at 95.7% and we achieve positive pricing, which includes rate and exposure of 14% in our homeowners portfolio. Lastly, in our Asia-focused international life insurance business, net premiums plus deposits were up over 52% in the quarter, while net premiums in our Global Re business were up over 22%. In the quarter, as you saw, we announced the definitive agreement to acquire the life and non-life insurance companies that house the personal accident supplemental health and life insurance businesses of Cigna and Asia-Pacific for $5.75 billion in cash. Upon completion of the transaction, which we expect during 2022, Asia Pacific share of Chubb's global portfolio will represent approximately 20% of the company. It all starts with our operating performance, which produced $3.3 billion in operating cash flow for the quarter and $8.5 billion for the first nine months. We continue to remain extremely liquid with cash and short-term investments of $5.1 billion at the end of the quarter even after our significant capital management actions. Among the capital related actions in the quarter, we returned $1.9 billion to shareholders, including $1.5 billion in share repurchases and $346 million in dividends. Through the nine months ended September 30th, we returned over $5 billion, including almost $4 billion in share repurchases or over 5% of our outstanding shares and dividends of over $1 billion. Our investment portfolio of $122 billion continues to be of a very high quality and we have not made any material changes during the quarter to our investment allocation. The portfolio increased $759 million in the quarter and at September 30th our investment portfolio remained in an unrealized gain position of $2.9 billion after-tax. Adjusted pre-tax net investment income for the quarter was $940 million similar to last quarter and $40 million higher than our estimated range benefiting from higher private equity distributions. As I noted on the second quarter earnings call, our investment income is based on many factors, and notwithstanding our better than expected results over the last few quarters, we continue to expect our quarterly run rate to be approximately $900 million. Pre-tax catastrophe losses for the quarter were $1.1 billion with about $1 billion in the U.S., of which $806 million was from Hurricane Ida and $135 million from international events, of which $95 million was from flood losses in Europe. Our reserve position remains strong, with net reserves increasing $1.7 billion or 3.2% on a constant dollar basis reflecting the impact of catastrophe losses in the quarter and 2021 growth, in particular from our agricultural business which has a seasonality impact on reserves. We had favorable prior period development of $321 million pre-tax which include $33 million of adverse development related to legacy environmental exposures. The remaining favorable development of $354 million was split approximately 30% in long-tail lines, principally from accident years 2017 and prior and 70% in short-tail lines, principally from our 2020 North American personal lines. Our paid-to-incurred ratio was 73% or a very strong 75% after adjusting for cats, PPD and agriculture. Book value decreased by $744 million or 1%, reflecting $1.16 billion in core operating income and a net gain on our investment portfolio of $190 million, which was more than offset by foreign exchange losses of $305 million and the $1.9 billion of share repurchases and dividends. Book and tangible book value per share increased 0.6% and 0.4% respectively from last quarter. Our reported ROE for the quarter and year-to-date was 12.3% and 14.4% respectively. Our core operating ROE and core operating return on tangible equity were 8.2% and 12.6% respectively for the quarter. For comparison purposes, our core operating ROE increases by 5 percentage points to 13.2% and our core operating income increases by a $1.61 per share to $4.25. Year-to-date, our core operating ROE, including the fair value mark on our PE funds would be 13.8%.

Core operating income in the quarter of $2.64 per share was up 32% with $250 million over prior year to $1.2 billion, while net income of $1.8 billion was up 53% from prior year. Yet, with over $1.1 billion of cats, we reported a 93.4% combined ratio with P&C underwriting income up 58% to $617 million, which speaks to the underlying strength of our businesses, and again, broad diversification of our company's sources of revenue and earnings, both domestically and globally. As I said at the opening, P&C premiums were up nearly 17% globally or 15.5% in constant dollar with commercial premiums up 22% and consumer up 4%.

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For the full year 2021, revenue was up 27% to reach $5.7 billion, which is a record. Versus 2019, revenue is up 8%. Wholesale revenue increased 36% to $3.2 billion in 2021. On a two-year basis, wholesale is up 3%. As detailed in previous calls, this performance has been tempered by the strategic decisions we've made to improve brand health by reducing our sales to the off-price channel and exiting approximately 2,500 undifferentiated retail doors in North America, an effort which is now concluded. Our direct-to-consumer business was up 26% to $2.3 billion in 2021. Versus 2019, direct-to-consumer is up 29%, with strong momentum in our owned and operated stores and our e-commerce business. Following a 40% increase in 2020, our e-commerce business was up 4% in 2021, equating to 45% growth on a two-year stack. 2021 gross margin was up 210 basis points to a record 50.3%. Versus 2019, gross margin is up 340 basis points, so excellent progress over two years, driven by benefits from pricing and a more favorable channel mix being offset by supply chain headwinds related to COVID-19 and the absence of MyFitnessPal, which we sold at the end of 2020. Our full year operating income reached $486 million, net income was $360 million, and our diluted earnings per share was $0.77, all three of which are records. We also realized strong balance sheet and cash flow performances with inventory down 9% to an absolute dollar value that is only slightly higher than in 2015 when we were a $4 billion business. And finally, one more record having ended the year with $1.7 billion in cash. There are too many to list, but a few standouts on the apparel side include RUSH, Iso-Chill, Rival Fleece, Crossback, Infinity, Unstoppable and Meridian, all names that delivered a 33% increase in revenue we achieved. On the footwear side, franchises like HOVR Sonic, Machina and Infinite; UA Flow Velociti Wind; Charged Pursuit, Assert, Aurora; Curry; and Project Rock contributed nicely to 35% growth, validating one of our largest long-term growth opportunities. As we lay the foundation for our Access to Sport initiative, we are excited to share more in the years ahead as we build opportunities for millions of youth to engage in sport by 2030, ensuring that the next generations of focused performers are inspired even more holistically than those before them. That said, let's look at how our regions performed in 2021, starting with North America, where revenue was up 29% to $3.8 billion or up 4% since 2019. Revenue in EMEA was up 41%, driven by nearly 50% growth in our wholesale business and continued momentum in direct-to-consumer. Our two-year performance is strong as well, with revenue in EMEA up 36% versus 2019. Next up is Asia Pacific, where revenue was up 32% in 2021, driven by nearly 50% growth in our wholesale business and a strong increase in direct-to-consumer sales. Clearly, the story here is about a more challenging environment that has developed in China as of late as evidenced by a 6% decline in our fourth quarter APAC revenue. Versus 2019, revenue in Asia Pacific was up 31%, so strong growth on a two-year basis. And finally, revenue in our Latin America region in 2021 was up 18%, driven by strength in our full-price wholesale and distributor businesses. Compared to the prior year, revenue was up 9% to $1.5 billion. From a channel perspective, fourth quarter wholesale revenue was up 16%, driven by strong performance in our full-price business, partially offset by lower year-over-year sales to the off-price channel. Our direct-to-consumer business increased 10%, led by 14% growth in our owned and operated retail stores and 4% growth in our e-commerce business. In addition, our e-commerce business is up more than 30% on a two-year basis. And licensing revenue was down 33%, driven primarily by the recognition timing of minimum royalty payments. By product type, apparel revenue was up 18%, with strength in our training and outdoor businesses. Footwear was up 17%, driven primarily by our running and training categories. And our accessories business was down 27% due to planned lower sales of our SPORTSMASKs compared to last year's fourth quarter. From a regional and segment perspective, fourth quarter revenue in North America was up 15% to $1.1 billion, driven by premium growth in our full-price wholesale and direct-to-consumer businesses. Compared to 2019, North American revenue was up 8% in the fourth quarter, driven by higher quality revenue than two years ago. In our international business, EMEA revenue was up 24%, driven primarily by strength in our wholesale business. Compared to the fourth quarter of 2019, revenue in EMEA was up 11%. Next up is APAC, where the business was down 6% in the quarter, driven by softer demand in our wholesale business, which more than offset DTC growth. Compared to 2019, total APAC revenue was up 19%. And finally, in line with expectations, Latin America revenue was down 22% due to the change in our business model as we moved certain countries to distributors, an effort which is now completed. Versus the fourth quarter of 2019, Latin America was down 20%. Related to gross margin, our fourth quarter improved 130 basis points to 50.7%. This expansion was driven by 350 basis points of pricing improvements due primarily to lower promotional activity within our DTC business, favorable pricing related to sales to the off-price channel and lower promotions and markdowns across our wholesale business. And 90 basis points of benefit related to lower restructuring charges. These improvements were partially offset by 190 basis points of COVID-related supply chain impacts, driven by higher freight costs, which meaningfully offset product cost benefits during the quarter; 80 basis points related to the absence of MyFitnessPal; and 50 basis points of unfavorable product mix, related primarily to lower SPORTSMASK sales, which carry a higher gross margin. SG&A expenses were up 15% to $676 million, primarily due to increased marketing investments, incentive compensation and nonsalaried workforce wages. Related to our 2020 restructuring plan, we recorded $14 million of charges in the fourth quarter. So we now expect to recognize total planned charges ranging from $525 million to $550 million. Thus far, we've realized $514 million of pre-tax restructuring and related charges. We expect to recognize any remaining charges related to this plan by the end of the first quarter of our fiscal year 2023. Moving on, our fourth quarter operating income was $86 million. Excluding restructuring and impairment charges, adjusted operating income was $100 million. After tax, we realized a net income of $110 million or $0.23 of diluted earnings per share during the quarter. Excluding restructuring charges, income related to our first year of the MyFitnessPal divestiture earnout and the noncash amortization of debt discount on our senior convertible notes, our adjusted net income was $67 million or $0.14 of adjusted diluted earnings per share. From a balance sheet perspective, inventory was down 9% to $811 million, driven by continued improvements in our operating model and inbound shipping delays due to COVID-related supply chain pressures. Our cash and cash equivalents were $1.7 billion at the end of the quarter, and we had no borrowings under our $1.1 billion revolving credit facility. Finally, following last year's convertible bond exchanges, we are proud to share that our cash position less debt of $663 million nearly doubled to $1 billion by the end of the fourth quarter. From a revenue perspective, we now expect our transition period to be up at a mid-single-digit rate compared to the previous expectation of a low single-digit rate increase. This includes approximately 10 points of revenue headwinds related to reductions in our spring/summer 2022 wholesale order book from supply constraints associated with ongoing COVID-19 pandemic impacts. At this time, we do expect these uncertainties to cause material impacts and variability in our future results. We expect our transition quarter rate to be down approximately 200 basis points against our Q1 2021 adjusted gross margin, which includes approximately 240 basis points of negative impact from higher freight expenses related to ongoing COVID-19 supply chain challenges in addition to an unfavorable sales mix, partially offset by pricing benefits. With that, we expect operating income to reach approximately $30 million to $35 million and diluted earnings per share to be approximately $0.02 to $0.03.

Compared to the prior year, revenue was up 9% to $1.5 billion. Related to gross margin, our fourth quarter improved 130 basis points to 50.7%. Related to our 2020 restructuring plan, we recorded $14 million of charges in the fourth quarter. So we now expect to recognize total planned charges ranging from $525 million to $550 million. We expect to recognize any remaining charges related to this plan by the end of the first quarter of our fiscal year 2023. After tax, we realized a net income of $110 million or $0.23 of diluted earnings per share during the quarter. Excluding restructuring charges, income related to our first year of the MyFitnessPal divestiture earnout and the noncash amortization of debt discount on our senior convertible notes, our adjusted net income was $67 million or $0.14 of adjusted diluted earnings per share. From a balance sheet perspective, inventory was down 9% to $811 million, driven by continued improvements in our operating model and inbound shipping delays due to COVID-related supply chain pressures. From a revenue perspective, we now expect our transition period to be up at a mid-single-digit rate compared to the previous expectation of a low single-digit rate increase. At this time, we do expect these uncertainties to cause material impacts and variability in our future results. We expect our transition quarter rate to be down approximately 200 basis points against our Q1 2021 adjusted gross margin, which includes approximately 240 basis points of negative impact from higher freight expenses related to ongoing COVID-19 supply chain challenges in addition to an unfavorable sales mix, partially offset by pricing benefits. With that, we expect operating income to reach approximately $30 million to $35 million and diluted earnings per share to be approximately $0.02 to $0.03.

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Our ICE processing centers are highly rated by national accreditation organizations and have provided high-quality and culturally responsive services for over 30 years under both Democratic and Republican administrations. The federal government has also put in place Title 42 public health restrictions at the Southwest border which result in the immediate removal of single adults apprehended by border patrol. These mitigation initiatives have included a focus on increasing testing capabilities, including investing approximately $2 million to acquire 45 Abbott Rapid COVID-19 devices and testing kits. We also installed bi-polar ionization air purification system at select secure service facilities, representing a company investment of approximately $3.7 million. We are focused on debt reduction and deleveraging. In 2020, we reduced our net debt by approximately $100 million. During the first quarter, we reduced net debt by approximately $57 million and we've set a goal of paying down between $125 million and $150 million in net debt in 2021. In the first quarter, we sold our interest in Talbot Hall, New Jersey reentry center with net proceeds of over $13 million. In February of 2021, we issued $230 million and 6.5% exchangeable senior notes due 2026 in a private offering. We used a portion of the net proceeds to redeem the outstanding amount of $194 million of senior notes due 2022 and use the remaining net proceeds to pay related transaction fees and expenses for general corporate purposes. Today, we reported first-quarter revenues approximately $576 million and net income attributable to GEO of $50.5 million. Our first-quarter results include a $13 million pre-tax gain on real estate assets and a $3 million pre-tax gain on the extinguishment of debt. Excluding these gains, we reported first-quarter adjusted net income of $0.28 per diluted share. We also reported first-quarter AFFO of $0.60 per diluted share. We expect full-year 2021 net income attributable to GEO to be in a range of $141 million to $150 million on a full-year 2021 revenues of approximately $2.23 billion to $2.25 billion. We expect full-year 2021 adjusted net income to be in a range of $1.02 to $1.10 per diluted share. We also expect full-year 2021 AFFO to be in a range of $2.23 to $2.31 per diluted share. We expect full-year 2021 adjusted EBITDA to be in a range of $395 million to $406 million. Additionally, the BOP has decided to discontinue its contract for the county-owned and managed Reeves County Detention Center 1 and 2 effective this month. For the second quarter of 2021, we expect net income attributable to GEO to be in a range of $35 million to $38 million on quarterly revenues of $558 million to $563 million. We expect second quarter 2021 AFFO to be between $0.57 and $0.59 per diluted share. At the end of the first quarter, we had approximately $290 million in cash on hand. More recently, we drew down an additional $170 million on our revolving credit facility, resulting in approximately $460 million in cash on hand and leaving approximately $14 million in additional borrowing capacity under our revolver. As part of this effort, we refinanced the outstanding amount of $194 million of our senior unsecured notes due 2022 earlier this year by issuing $230 million in new 6.5% exchangeable senior unsecured notes due in 2026. With respect to our capital expenditures, as we had previously announced, we have canceled approximately $35 million in capex previously planned for 2021. We now expect total capex in 2021 to be $69 million, including $14 million for maintenance capex. In 2020, we paid down approximately $100 million in debt. During the first quarter of the year, we paid down approximately $57 million in net debt, which represents substantial progress toward our previously articulated objective of reducing net debt by $125 million to $150 million in 2021. During the first quarter, we sold our interest in the Talbot Hall reentry facility in New Jersey, which resulted in net proceeds to GEO of approximately $13 million. To date, we have administered over 100,000 COVID tests to those in our care across our secure services facilities. To date, over 18,000 vaccinations have been administered at our secure services facilities. The BOP has also decided to discontinue its contract for the county-owned and managed Reeves County Detention Center 1 and 2, effective this month. And our current expectation is that those two contracts will not be renewed by the BOP. We were notified by the U.S. Marshals that the agency would not renew the contract in our company-owned Queens detention facility in New York, which expired on March 31. All those entrusted in our care provided culturally sensitive meals approved by registered dietitian, clothing, 24/7 access to healthcare services and full access to telephone and legal services. We have provided these high-quality professional services for over 30 years under Democratic and Republican administrations. I'd like to briefly update you on our GEO care business unit. During 2020, GEO allocated $1.7 million to address basic community needs of post-release participants such as transitional housing, treatment, transportation, clothing, food, education and job placement assistance. Throughout the year, our post-release support team helped more than 3,600 individuals returning to their communities. We believe that it provides a proven successful model on how the 2.2 million people in the criminal justice system can be better served and changing how they live their lives. We've provided high-quality professional services for over 30 years under both Democratic and Republican administrations and under legislative branches controlled by both parties. On May 15, Blake will be succeeded by James Black, who has 23 years of service with GEO.

We are focused on debt reduction and deleveraging. We also reported first-quarter AFFO of $0.60 per diluted share. We expect full-year 2021 net income attributable to GEO to be in a range of $141 million to $150 million on a full-year 2021 revenues of approximately $2.23 billion to $2.25 billion. We also expect full-year 2021 AFFO to be in a range of $2.23 to $2.31 per diluted share. For the second quarter of 2021, we expect net income attributable to GEO to be in a range of $35 million to $38 million on quarterly revenues of $558 million to $563 million. We expect second quarter 2021 AFFO to be between $0.57 and $0.59 per diluted share. And our current expectation is that those two contracts will not be renewed by the BOP. We were notified by the U.S. Marshals that the agency would not renew the contract in our company-owned Queens detention facility in New York, which expired on March 31. I'd like to briefly update you on our GEO care business unit.

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Today's mid-$60 oil price is robust compared to what we experienced over the past year. Currently, approximately 30% and of our active U.S. fleet is under some type of performance contract. Contrasting the successful adoption of these new commercial models compared to a year ago, where we only had about 10% of our fleet on performance contracts. I do believe that FlexRig solutions are unique in the industry and contributing to the demand for H&P as our current rig count in the U.S. is at 118 rigs, up 25% since the end of fiscal Q1. In addition, we have approximately 35% of the public company E&P market share and about 14% of the private E&P market share. We estimate that industrywide, there are only a handful of idle super-spec rigs that have been active during the past nine to 12 months, particularly as longer idled rigs are put back to work, higher reactivation costs will play a larger role in contract economics going forward. The company generated quarterly revenues of $296 million versus $246 million in the previous quarter. Total direct operating costs incurred were $231 million for the second quarter versus $200 million for the previous quarter. General and administrative expenses totaled $39 million for the second quarter, consistent with our expectations and with the previous quarter. As a result, we developed and began executing a plan to sell 68 domestic non super-spec rigs, all within our North America Solutions segment, the majority of which were previously written down and decommissioned and/or used as capital-spared donors. These assets were written down to their net realizable value of $13.1 million and were reclassified as held for sale on our balance sheet. As a result, we recognized a noncash impairment charge of $54.3 million. In conjunction with this initiative, we incurred a loss on sale of assets of $18.5 million, primarily due to closing on the sale of scrap inventory and obsolete capital spares for an aggregate loss of $23 million. This loss was offset by approximately $4.5 million in aggregate gains on asset sales, primarily related to customer reimbursement for the replacement value of drill pipe damaged or lost in drilling operations. Our Q2 effective income tax rate was approximately 23%, which is within our previously guided range. To summarize this quarter's results, H&P incurred a loss of $1.13 per diluted share versus a loss of $0.66 in the previous quarter. Absent these select items, adjusted diluted loss per share was $0.60 in the second quarter versus an adjusted $0.82 loss during the first fiscal quarter. Capital expenditures for the second quarter of fiscal 21 were $17 million below our previous implied guidance as the timing for that spending has shifted to the third and fourth quarters. H&P generated approximately $78 million in operating cash flow during the second quarter of fiscal 21. We have averaged 105 contracted rigs during the second quarter, up from an average of 81 rigs in fiscal Q1. We exited the second fiscal quarter with 109 contracted rigs, which is at the high end of our guidance range as demand for rigs continue to expand from the low reached back in August of 2020. Revenues were sequentially higher by $48 million due to the activity increase. North America Solutions operating expenses increased $29 million sequentially in the second quarter, primarily due to the addition of 15 rigs. We ended up reactivating 21 rigs during the quarter due to churn across basin geographies where some releases offset the total number of reactivations. This resulted in onetime reactivation expenses of approximately $9.7 million in fiscal Q2, including a portion of expenses for the April incremental fleet additions. Looking ahead to the third quarter of fiscal 21 for North America Solutions. As of today's call, with the nine additions I discussed, we have 118 rigs contracted and turning to the right. We expect to end the third fiscal quarter of 2021 with between 120 and 125 contracted rigs. As of March 31, about 30% of our active rigs were working under some form of a performance contract. In the North America Solutions segment, we expect gross margins to range between $65 million to $75 million with no early termination revenue expected. We expect those expenses to be approximately $6 million in the third quarter. Historical experience indicates the rig stacked for nine months or longer will incur costs in excess of $400,000 to reactivate, and that figure rises as more time passes. Keep in mind that most of our rigs were stacked back in April of 2020, some 12 months ago. Our current revenue backlog from our North American Solutions fleet is roughly $370 million for rigs under term contract. As we look toward the third quarter of fiscal 21 for International, our activity in Bahrain is holding steady with the three rigs working, and we have two rigs under contract in Argentina. In the third quarter, we expect to have a loss of between $1 million to $3 million, apart from any foreign exchange impacts. Offshore generated a gross margin of $6 million during the quarter, which was at the lower end of our estimates due to some unexpected downtime on one rig. As we look toward the third quarter of fiscal 21 for Offshore segment, we expect that Offshore will generate between $6 million and $9 million of operating gross margin. Capital expenditures for full fiscal 2021 year are still expected to range between $85 million to $105 million with the remaining spend distributed evenly over the last two fiscal quarters. Our expectations for general and administrative expenses for the full fiscal year 21 have not changed and remain approximately $160 million. We also remain comfortable with the 19% to 24% range for our estimated annual effective tax rate and do not anticipate incurring any significant cash tax in FY 21. We had cash and short-term investments of approximately $562 million in March 31, 2021, versus $524 million at December 31, 2020. Including our revolving credit facility availability, our liquidity was approximately $1.3 billion. In mid-April, lenders with $680 million of commitments under our $750 million in revolving credit facility, or RCF, extended the maturity of the RCF from November of 2024 to November 2025. The remaining $70 million of commitments under the 2018 credit facility will continue to expire in November of 2024. Our debt-to-capital at quarter end was about 14%, and our net cash position exceeds our outstanding bond. As discussed in our February earnings call, we received a $32 million tax refund, plus $3 million of interest in January. Still included in our accounts receivable is approximately $19 million related to further tax refunds that we expect to collect in the coming quarters. The preponderance of our trade AR continues to be less than 60 days outstanding from billing date and increased a modest $8 million sequentially.

To summarize this quarter's results, H&P incurred a loss of $1.13 per diluted share versus a loss of $0.66 in the previous quarter.

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Our top line momentum reached 10% or 9% organic in a constrained environment. Institutional and specialty grew 19%; pest elimination 10%; and industrial remained strong, growing 8% in the quarter, and our new business and innovation pipelines remain really strong. As we all know, inflation kept rising substantially and still, top line gain momentum, including pricing, which accelerated to 4% as we exited the quarter. This was required to compensate for significant incremental costs from supply constraints and much high inflation pressure on our raw material and freight costs, discussed by close to 20% in the fourth quarter, nearly double the rate we saw in the third. And just being close to a total of $1 per share unfavorable impact for the full year with almost half of that in Q4 alone. We also expect inflation to remain at a high level, at least for the first half of the year, while we expect it to ease during the second half, and we're getting ready for this, too. Our full year pricing expectation for '22 is expected to be in the 5 to 6% range, which combined with our steady productivity work is expected to get ahead of inflation dollar in the first half and enhanced margins in the second half of the year and certainly beyond as the Ecolab model has proven many times. All these actions should lead to a strong '22 with strong top line and adjusted earnings growth in the low teens for the full year and a first quarter with very healthy sales growth and a flattish earnings per share as pricing keeps building fast. Our opportunity has never been larger as we chase a global market that's today greater than $150 billion and growing fast.

We also expect inflation to remain at a high level, at least for the first half of the year, while we expect it to ease during the second half, and we're getting ready for this, too. Our full year pricing expectation for '22 is expected to be in the 5 to 6% range, which combined with our steady productivity work is expected to get ahead of inflation dollar in the first half and enhanced margins in the second half of the year and certainly beyond as the Ecolab model has proven many times. All these actions should lead to a strong '22 with strong top line and adjusted earnings growth in the low teens for the full year and a first quarter with very healthy sales growth and a flattish earnings per share as pricing keeps building fast.

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During today's call, we will discuss ITW's first quarter 2020 financial results as well as the impact of the global pandemic on our business and our strategy for managing through it. Now on to first quarter results, total revenue declined 9% year on year with organic revenue down 6.6%, currency at 1.5% headwind, a negative 1% impact from divestitures and 40 basis points of PLS. The majority of the organic revenue decline occurred in the last two weeks of March where we saw organic revenue down more than 20%. By geography, North America was down 5% and Europe was down 7%, China was down 24% for the quarter, but appears to have bottomed in February and was flat year on year in April. Despite a 9% decline in revenues, operating margin was flat at 23.6%, five of our seven segments expanded margins in the quarter due largely to benefits from enterprise initiatives which contributed 120 basis points to operating margin at the enterprise level. After tax return on invested capital is 27% and free cash flow was $554 million with a conversion rate of 98% of net income. ITW is 80/20 front to back methodology and the laser light focus that drives on the relative handful of critical performance, difference makers, and every one of our businesses has served the company extremely well in times of both opportunity and challenge for a long time now. And it follows from there that the robust free cash flow we generate through our strong margin profile, and the unique attributes of our business model, combined with our very, disciplined capital allocation strategy, gives us an extremely strong balance sheet and Tier 1 credit ratings. Although, some facilities are subject to mandatory shutdowns, roughly 95% of our global manufacturing capacity is currently available to be deployed to serve our customers. As we sit here today, one month into the quarter, we're estimating the Q2 revenues will be down 30% to 40% on a year-over-year basis. Our automotive OEM business will be the hardest hit with revenues potentially down 60% to 70% year-over-year. As difficult as it may look, if it plays out this way, we expect that ITW will still make operating profit in the $200 million to $400 million range, generate free cash flow of more than $500 million and end the Q2 with cash on hand of about $1.5 billion. Under very fast paced recovery, we end up down 15% for the full year, and margins are 19% to 21%. They're much slower recovery, revenues are down 25%. Yet, our margins are still a very strong 17% to 19%. At quarter end, we have more than $1.4 billion of cash and cash equivalents on hand. We have a $2.5 billion undrawn credit facility available to us, if needed in the future bring our total liquidity to about $4 billion as we sit here today. Our net leverage is only 1.7 times and our next maturity is pretty small, $350 million and not until September 2021. And our annual conversion rate from net income is consistently above 100%. As evidenced by Tier 1 credit ratings that are the highest in our peer group, we continue to have excellent access to credit markets in the event that we needed. And as we sit here today, our largest U.S. plan is funded at 104%. We have a long history, with more than 56 years of growing the dividend. And we are part of a small group of so-called dividend aristocrats, and one of about 18 companies that has increased its dividend for more than 50 years. Since 2012, we have increased the annualized dividend from $1.52 per share to currently $4.28 per share, a cumulative annual growth rate of 16%. Food equipment had a good quarter with organic growth up 2% year-over-year despite a tough comp of 5% organic growth last year. The service business was solid up 4% in the quarter. Equipment growth of 1% reflects double-digit growth in retail and modest decline in institutional and restaurants against tough year-over-year comps for both of those. Operating margin expanded 90 basis points to 27.5% with enterprise initiatives, the main contributor. Test and measurement in electronics had a very strong quarter with test and measurement up 6% with 13% growth in our Instron business. Electronics was up 2%. Margin was the highlight as the team expanded operating margins 330 basis points to a record, 28.1% the highest in the company this quarter with strong contributions from enterprise initiatives and volume leverage. Also in the quarter, we divested in electronics business with 2019 revenues of approximately $60 million. In the face of an unprecedented demand contraction in Q2, as Michael commented earlier, we will still generate operating income in the hundreds of million dollars and generate over $500 million in free cash flow. That being said, decremental margins should likely be in our normal 35% to 40% range in Q4.

During today's call, we will discuss ITW's first quarter 2020 financial results as well as the impact of the global pandemic on our business and our strategy for managing through it.

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These imports will come at a cost in both our higher intensity carbon footprint and in price as the Baltic Dry Index is up 135% from a year ago and is at a 10-year high. You can see in this quarter, we purchased approximately $185 million of Eagle stock. As for Wallboard, pricing is most strongly driven by demand, and demand has been strong as evidenced by our 33% year-on-year increase in Wallboard prices. We are currently hedged for approximately 50% of our natural gas needs through the remainder of our fiscal year at slightly under [$4 per million], which should help us manage our cost swings. Outbound freight in Wallboard is also important, and we saw a 14% increase in freight costs this quarter. Second quarter revenue was a record $510 million, an increase of 14% from the prior year. Second quarter diluted earnings per share from continuing operations was $2.46, a 14% increase from the prior year. And adjusting for our refinancing actions during the quarter, adjusted earnings per share was $2.73, a 26% improvement. Revenue in the sector increased 5%, driven by the increase in cement sales prices and sales volume. The price increases range from $6 to $8 per ton and were effective in most markets in early April. Operating earnings increased 13%, reflecting higher cement prices and sales volumes as well as reduced maintenance costs. Consistent with the comments we made in the first quarter, and because we shifted all of our planned cement maintenance outages to the first quarter, our second quarter maintenance costs were about $4 million less than what they were in the prior year. Revenue in our Light Materials sector increased 28%, reflecting higher Wallboard sales volume prices. Operating earnings in the sector increased 39% to $67 million, reflecting higher net sales prices, which helped offset higher input costs, mainly recycled fiber costs and energy. During the first six months of the year, operating cash flow was $262 million, a 27% year-on-year decrease reflects the receipt of our IRS refund and other tax benefits in the prior year. Capital spending declined to $27 million. And as Michael mentioned, we restarted our share repurchase program and our quarterly cash dividend this year and returned $259 million to shareholders during the first half of the year. We repurchased approximately 1.7 million shares or 4% of our outstanding. At the end of the quarter, 5.6 million shares were available for repurchase under the current authorization. During this quarter, we completed the refinancing of our capital structure, which included issuing $750 million of 10-year senior notes with an interest rate of 2.5%.

Second quarter revenue was a record $510 million, an increase of 14% from the prior year. Second quarter diluted earnings per share from continuing operations was $2.46, a 14% increase from the prior year. And adjusting for our refinancing actions during the quarter, adjusted earnings per share was $2.73, a 26% improvement.

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Third quarter highlights includes, sales increased 22% year-over-year and 13% sequentially from second quarter, the largest second to third quarter increase in over 10 years. Gross margin improved 50 basis points year-over-year and earnings per share grew 32%. Total company sales increased 22% in the third quarter from prior-year. In local currency sales rose 17%. Engine sales recorded strong year-over-year growth of 26%, 22% in local currency. Our 51% Off-Road business growth was widespread with all regions experiencing an increase in sales. In particular, local currency sales in Europe and Asia-Pacific were up 78% and 42% respectively. China sales increased almost 50%. PowerCore continues to gain traction in China and we are on track to deliver 2 times as many PowerCore air cleaners in 2021 compared to 2020. On-Road sales experienced a sharp rebound from the 1% year-over-year decline in second quarter, increasing 58% from 2020. Order and build rates for Class 8 trucks in the US have risen significantly over the past few months and are projected by external data sources to remain at a high level over the next several quarters. Aftermarket sales increased 23% in third quarter including a 4% currency benefit. In local currency sales Latin America increased by over 40% and Europe and Asia-Pacific were up 17% and 18% respectively. Sales in third quarter increased 12% or 7% excluding the favorable impact of currency translation and growth was widespread across geographies. We also saw increased sales in first-fit and replacement products across the rest of the IFS businesses, including greater than 50% growth at BofA and mid 20s percentage growth in Process Filtration sales. Sales of Gas Turbine Systems or GTS declined about 13% year-over-year due to a decline in demand for gas turbines used in the oil and gas market, a slowing of retrofit activity and the timing of projects. Therefore, in third quarter Donaldson contributed $1 million to support our local community and help rebuild areas in Minneapolis and St. Paul that were damaged from the unrest over the last year. Total sales increased 22% year-over-year and operating margin increased 90 basis points to 14.3%. Our Engine segment profitability increased 250 basis points year-over-year as we leverage the significant uptick in sales. The Industrial segment in contrast, recorded a 50 basis decline in profitability. Third quarter company gross margin improved by 50 basis points to 33.7% which accounted for a bit over half of the 90 basis point increase in operating margin. In the third quarter operating expenses as a percentage of sales declined 40 basis points year-over-year. We made capital investments of approximately $10 million in the third quarter, a decline of over 60% from the third quarter of last year as we bring to completion many of our significant capital projects from the prior two years. We paid over $26 million in dividends and repurchased over $32 million of our stock in the third quarter. Year-to-date we have returned almost $160 million to shareholders. We have paid a dividend every quarter for the past 65 years and increased our dividend every calendar year for the past 25 years, making Donaldson among a small group of companies that are included in the S&P High Yield Dividend Aristocrats Index, maintaining this track record is important to us. Given the strong results we experienced and our visibility into the remainder of fiscal year, we expect full year sales will be up 9% to 11% year-over-year versus our prior guidance of 5% to 8% increase. Our annual guidance assumes a full year 3% benefit from currency translation. In our Engine segment, we project a sales increase of 12% to 14%, which is up from our prior guidance of an 8% to 11% increase. We project full year Off-Road sales will now increase in the mid to high 20% range, driven by continued strong demand for construction and agricultural equipment and increase ore activity in mining. Our prior guidance was for low 20% range growth. We continue to expect our full year sales in Aerospace and Defense to decline in the mid to high 20% range, given the pandemic related stock conditions in commercial aerospace resulted in weak demand. In the Industrial segment, we expect a full-year sales increase of 3% to 5% versus our previous guidance of down 2% to up 2%. We are expecting adjusted operating margin in a range of 13.8% to 14.2% compared to 13.2% in 2020. The midpoint of this range implies a sequential step up in operating margin to about 14.5% for the back half of the year compared to 13.5% in the first half. Additionally, we expect to maintain a disciplined approach to our operating expenses and deliver further leverage in the remainder of the year, despite an expected full year headwind of $5.25 million from increased incentive compensation, about half of which was incurred in the third quarter. Other fiscal '21 operating metric expectations are: interest expense of about $13 million, other income of $5 million to $7 million and a tax rate between 24% and 25%. Capital expenditures are planned to be in the range of $55 million to $60 million. Taking the midpoint of our sales on capital expenditure guidance for 2021 would put us at just over 2% of sales which as we previously noted as lower in the last few years due to the completion of major projects. We also plan to repurchase 1.5% to 2% of our shares outstanding. Our cash conversion has been very good in the first nine months of fiscal '21 and we expect to exceed 100% cash conversion for the full year. The sales momentum we're currently experiencing is likely to carry through to the first half of fiscal 2022. The expansion of our Filter Minder real time monitoring service to Engine liquid filtration in addition to air filtration and our Rugged Pleat Baghouse industrial dust collector that we introduced in first quarter, which is already on pace to generate 2 times our initial first year forecasted sales.

Given the strong results we experienced and our visibility into the remainder of fiscal year, we expect full year sales will be up 9% to 11% year-over-year versus our prior guidance of 5% to 8% increase. Capital expenditures are planned to be in the range of $55 million to $60 million. We also plan to repurchase 1.5% to 2% of our shares outstanding. The sales momentum we're currently experiencing is likely to carry through to the first half of fiscal 2022.

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For the first quarter, we delivered revenues well above the high end of the range of our outlook with a total non-GAAP revenue ending the quarter at $257 million, representing year-over-year growth of 33%. First-quarter adjusted EBITDA was $106.5 million, representing an adjusted EBITDA margin of 41%, exceeding the high end of our outlook for the first quarter. Our Q1 core IT management maintenance renewal rate of 87% is higher than the low- to mid-80% renewal rates we noted we expected in 2021 when we discussed our full-year results in February. We continue to focus on customer retention as a key priority and hope to grow back to our historical and best-in-class renewal rates of over 90%. Our N-able business, again, delivered double digit, 13% revenue growth in Q1, and we continue to expand our portfolio in support of our MSP partners and SME customers. We are accelerating our momentum in the database monitoring segment with the formation of a dedicated core team to help us capture what we believe is a large and growing market opportunity of over $6 billion. First, the market opportunity for N-able starts with a small and medium enterprise IT spending, which is over $1 trillion globally and growing. We believe the market opportunity for our software solutions is approximately $23 billion and expected to nearly double by 2025. As we strive to become a stand-alone Rule of 50 company with a heavier lean toward growth from the potential spin-off transaction, I want to highlight the unique aspect of our growth model called partner enabled expansion. We delivered a solid 13% total revenue growth and 15% subscription revenue growth, especially considering a couple of headwinds worth noting. We had a much better quarter than anticipated and finished well above the high end of the range of our outlook for the first quarter with total non-GAAP revenue ending the quarter at $257 million, representing year-over-year growth of over 3%. Total N-able revenue was $83 million, representing growth of 13%. And total -- or core IT management revenue was $174 million. Total license and maintenance revenue was $147.9 million in the first quarter, down 3.5% versus the prior year. Maintenance revenue was $123 million in the first quarter, up 6% versus the prior year. Our Q1 trailing 12-month rate was 91%. However, given the heightened focus on smaller windows of performance since the cyber incident, we want to provide the in-quarter renewal rate for Q1, which was approximately 87%. This exceeded our expectations for renewal rates in the low- to mid-80% range throughout 2021, which we provided on our last earnings call. In addition, we expect this renewal rate of 87% to increase by a few percentage points based on historical trends after factoring in renewals that expire bookings that occur post quarter end. For the first quarter, license revenue was $24.9 million, which represents a decline of approximately 33% as compared to the first quarter of 2020. Total ARR reached approximately $961 million as of March 31, reflecting year-over-year growth of 12%. Subscription ARR grew 13%, reaching $438 million at the end of the quarter. First-quarter non-GAAP subscription revenue was $109.1 million, up 15% year over year, which was driven by N-able's 15% year-over-year subscription revenue growth, as well as solid performance in core IT management subscription revenue. We finished the quarter -- we finished the first quarter of 2021 with 1,074 customers that have spent more than $100,000 with us in the last 12 months, which is a 16% improvement over the previous year and 17% more since year-end. First-quarter adjusted EBITDA was $106.5 million, representing an adjusted EBITDA margin of 41%, exceeding the high end of the outlook for the first quarter. Unlevered free cash flow for the first quarter totaled $51 million. Excluded from EBITDA and unlevered cash flow -- unlevered free cash flow are one-time costs of approximately $20 million, including $10 million of spin-off-related costs and $10 million of cyber-related remediation, containment, investigation and professional fees, net of insurance proceeds. They are separate and distinct from the $20 million to $25 million of Secure by Design initiatives, which are aimed at enhancing our IT security and supply chain process. Net leverage at March 31 was 3.2 times our trailing 12-month adjusted EBITDA. With $374.4 million in cash at March 31, we believe we are well-positioned from a financial standpoint to continue to invest in the future growth of our business. For the second quarter of 2021, we expect total non-GAAP revenue to be in the range of $254 million to $258 million, representing year-over-year growth of 3% to 5%. Adjusted EBITDA for the second quarter is expected to be $102 million to $104 million, which implies an approximately 40% adjusted EBITDA margin. Non-GAAP fully diluted earnings per share is projected to be $0.21 per share, assuming an estimated 319.6 million fully diluted shares outstanding. And last, our outlook for the second quarter assumes a non-GAAP tax rate of 22%, and we expect to pay approximately $22 million in cash taxes during the second quarter of 2021. Increasing the percentage of our recurring revenue has been a focus over the past five years, and recurring revenue is down 90% of our total revenue. We expect our conversion rate for the full year to be above 70% and grow to the low 80% range in 2022.

Non-GAAP fully diluted earnings per share is projected to be $0.21 per share, assuming an estimated 319.6 million fully diluted shares outstanding.

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Regarding our Q4 performance, our revenues were $4.39 billion, approximately $85 million above the top end of our guidance. Concerning adjusted EBIT margin, we delivered 7.5%, also higher than the top end of our guidance. Book-to-bill for the quarter was 1.08, underscoring the success of bringing the new DXC, which focuses on our customers and colleagues to the market. This is the fourth straight quarter that we've delivered a 1.0 or better book-to-bill. We have achieved our goal of $550 million of cost savings in FY '21. Our cost optimization program was responsible for the strong adjusted EBIT margin of 7.5% in Q4. So the 1.08 book-to-bill that we delivered this quarter is consistent evidence that our plan is working. In Q4, 53% of our bookings were new work and 47% were renewals. Our ability to deliver a consistent book-to-bill of over 1.0 in each of the four quarters of FY '21 is clear evidence that we can win in the IT services industry. We paid down $6.5 billion of debt in the past nine months and subsequent to year-end, retired an additional $500 million. We are now approaching a far more manageable $5 billion debt level. Fourth, we will reduce restructuring and TSI expense to approximately $550 million in FY '22 to under $100 million in FY '24, ultimately improving cash flow. GAAP revenue was $4.39 billion, $85 million higher than the top end of our guidance. On an organic basis, revenue increased 0.4% sequentially. Organic revenue declined 7% year over year due to the previously disclosed runoffs and terminations. As we mentioned on our third-quarter earnings call, our Q3 10.5% year-over-year decline would be the high watermark. GAAP EBIT margins were negative 16.8% in the fourth quarter, impacted by approximately $1.1 billion of costs, including pension mark-to-market, asset impairments, restructuring TSI, loss on disposals, and debt extinguishment costs. Excluding these items, adjusted EBIT margin was 7.5% in the fourth quarter, an improvement of 50 basis points from the third quarter. Non-GAAP diluted earnings per share was $0.74 and was negatively impacted by $0.04 due to a higher-than-expected tax rate of 32%. In Q4, bookings were $4.7 billion for a book-to-bill of 1.08, the fourth straight quarter of a book-to-bill greater than one. For the full year, this takes our book-to-bill to 1.12, compared to 0.9 in FY '20. GBS was $2 billion or 46% of our total Q4 revenue. Organic revenues increased 2% sequentially, primarily reflecting the strength of our applications and analytics and engineering business. Year over year, GBS revenue was down 4% on an organic basis. GBS segment profit was $315 million with a 15.8% profit rate, up 160 basis points from Q3. GBS bookings for the quarter were $2.39 billion for a book-to-bill of 1.2 and a full-year book-to-bill of 1.32, compared to 0.99 in the prior year. Revenue was $2.39 billion, down 0.9% sequentially and down 9.3% year over year on an organic basis due to the previously disclosed terminations and runoffs. The ITO business benefited from approximately $100 million of resale revenue, resulting from a typical Q4 increase of customer demand due to their fiscal year-end. GIS segment profit was $98 million with a profit margin of 4.1%, a 40-basis-point margin improvement over the third quarter. GIS bookings were $2.3 billion for a book-to-bill of 0.98. Book-to-bill for FY '21 was 0.94, compared to 0.83 in the prior year. IT outsourcing revenue was $1.19 billion in the quarter, up 1.4%, the first positive sequential growth since we began tracking in this manner. ITO book-to-bill was 0.98 in the quarter. Cloud and security revenue was $524 million, declined 1.6% sequentially, and was down 5.7% year over year. The cloud and security business had a difficult compare as the third quarter grew 4.7% sequentially. Book-to-bill was 1.08 in the quarter. Moving up the stack, the applications layer posted a 1.9% sequential growth and was down 7.2% year over year. Analytics and engineering revenues were $478 million, up 2% on a sequential basis and up 8.4% compared to prior year. Analytics and engineering book-to-bill was 1.46 in the quarter. The modern workplace and BPS revenues were $795 million, down 3.3% sequentially and down 10.5% compared to the prior year. Fourth-quarter cash flow from operations totaled an outflow of $280 million. Free cash flow for the year was negative $652 million, impacted primarily by four nonrecurring items. Q4 tax payments of $531 million related to the business sale. As you may recall, we planned $900 million of tax payments, so this result surpassed our expectation. As we told you before, in Q3, $832 million related to readying the U.S. state and local Health and Human Services business for sale and normalizing payables and $200 million related to deferrals of certain tax payments due to COVID relief legislation that will be paid during FY '22. Since DXC was formed four years ago, we had significant cash outflows with approximately $900 million in expense per year on average. In FY '22, this will be reduced to approximately $550 million, with a larger portion being allocated to facilities restructuring efforts to improve the work experience for our people as we reshape our portfolio for our virtual model. As you can see, we have achieved a lot in this area, reducing our net debt leverage ratio by more than one turn from the high watermark of 2.4 to one at the end of March. Organic revenues declines are expected to moderate, down 2% to down 4% in the first quarter year over year. This translates into reported revenues between $4.08 billion and $4.13 billion. Our sequential revenue is lower for two reasons: first, previously mentioned lumpiness of resale revenue that occurs in Q4; second, our portfolio-shaping efforts reduced revenue by about $100 million. EBIT margin 7.4% to 7.8% includes 20 basis points of margin headwinds due to the sale of our healthcare provider software business. Non-GAAP diluted earnings per share in the range of $0.72 to $0.76. Organic revenue growth of minus 1% to minus 2%. On a year-over-year basis, divestitures will account for $1.2 billion of the revenue decline. This translates into revenue of $16.6 billion to $16.8 billion; EBIT margin, 8.2% to 8.7%; non-GAAP diluted earnings per share of $3.45 to $3.65, an increase of 42% to 50% year over year; free cash flow of $500 million. Organic revenue growth of 1% to 3%; adjusted EBIT margin of approximately 10% to 11%; non-GAAP diluted earnings per share of $5 to $5.25; free cash flow of approximately $1.5 billion. In the market, we went from losing to winning, and we repaid over $6 billion in debt, taking our balance sheet from highly leveraged to strengthened.

Non-GAAP diluted earnings per share was $0.74 and was negatively impacted by $0.04 due to a higher-than-expected tax rate of 32%. This translates into reported revenues between $4.08 billion and $4.13 billion. Non-GAAP diluted earnings per share in the range of $0.72 to $0.76. This translates into revenue of $16.6 billion to $16.8 billion; EBIT margin, 8.2% to 8.7%; non-GAAP diluted earnings per share of $3.45 to $3.65, an increase of 42% to 50% year over year; free cash flow of $500 million. Organic revenue growth of 1% to 3%; adjusted EBIT margin of approximately 10% to 11%; non-GAAP diluted earnings per share of $5 to $5.25; free cash flow of approximately $1.5 billion.

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Unfortunately, local restrictions remain in force and we were only operating at 30% of capacity to start the quarter. Our estimate today is that we are operating approximately at 75% to 80% of productivity. Benchmark began its journey as a medical device manufacturer more than 40 years ago and has maintained partnerships with some of the largest medical technology companies in the world. Even considering the challenging environment, we achieved revenue of $515 million in the first quarter, which were supported by strong demand in our Semi-Cap, Medical, and A&D sectors. Our gross margins for the quarter were 8.4% and non-GAAP earnings per share were $0.22. And as a result, we estimate that our China factory inefficiencies impacted our global earnings per share by approximately $0.08. Our cash conversion cycle for the quarter was 81 days. We used $3 million in cash flow from operations and free cash flow was a negative $15 million as a result of $13 million spent on capex. Originally we expected to spend approximately $50 million in capital expenditures in fiscal year 2020. Medical revenues for the first quarter increased 15% sequentially and were up 14% year-over-year from volume increases across several customers for new and existing programs. Semi-Cap revenues were up 2% in the first quarter and up 25% year-over-year where increase in demand across the majority of our Semi-Cap customers along with the ramp of new customer to our portfolio. A&D revenues for the first quarter increased 13% sequentially and were up 15% year-over-year from new program ramps for defense satellite, munition and security. We did receive signals late in the quarter of demand decreases in Commercial Aerospace segment which is less than 30% of our A&D sector revenues. Industrial revenues for the first quarter decreased 4% sequentially and 12% year-over-year. Overall the higher value market represented 82% of our first quarter revenue. Turning now to our traditional market; computing was down 71% year-over-year from the completion of the legacy computing contract in 2019 and 18% sequentially quarter-over-quarter from lower data center storage and commercial printing product demand. Telco was down 15% sequentially and down 37% year-over-year from lower demand for infrastructure build out related products. Our traditional markets represented 18% of first quarter revenues. Our top 10 customers represented 42% of sales for the first quarter. Our GAAP earnings per share for the quarter was $0.10 and our GAAP results included $2.9 million of restructuring and other non-recurring costs in Q1. These costs included $1.9 million of cost-related to our previously announced site consolidation effort and other restructuring type activities around our network and $1 million for an impairment related to a building that is now being classified as held-for-sale. Turning to slide 10 for our non-GAAP financial information for Q1, our non-GAAP -- our Q1 non-GAAP gross margin was 8.4% a 100-basis-point increase quarter-over-quarter and 30-basis-point year-over-year. Our SG&A was $31.6 million, an increase of approximately $7 million sequentially. Operating margin was 2.3%, a decrease from 2.6% in Q4 due to the lower than expected revenue and inefficiencies related to COVID-19. In Q1, 2020, our non-GAAP effective tax rate was 19%, which was lower than expected for the quarter due to the distribution of income across our network. We expect that for Q2, our non-GAAP effective tax rate will continue to be in the range of 20% to 22%, again because of the distribution of income around our global network. Non-GAAP earnings per share was $0.22 for the quarter and ROIC was 7.1%. Our CEO, the board and our senior executive team will take a temporary 10% salary cut, while the rest of the senior leaders in the company will take a 7% salary cut through Q3 2020. Our cash balance was $412 million at March 31 with $223 million available in the U.S. Our cash balances include $95 million of proceeds from borrowings under our revolving line of credit. We do expect our net interest expense to increase by $500,000 in Q2. Overall at the end of Q1 2020 we are in a positive net cash position of approximately $170 million. Our accounts receivable balance was $318 million, a decrease of $6 million from December 31. Contract assets were $160 million at March 31 and $161 million at December 31. Payables were up $13 million quarter-over-quarter. Inventory at March 31 was $338 million up $23 million quarter-over-quarter due to mix changes from customers late in the quarter and bringing in inventory to support long production cycles for product in our Semi-Cap and Medical sectors. For Q1 2020, our cash conversion cycle was 81 which was within our expectations at the beginning of the quarter and was achieved even considering the challenging environment. As discussed previously after the completion of the legacy computing contract in the third quarter of 2019, our cash conversion cycle will be between 78 and 83 days. Turning to slide 13 for our capital allocation update, in Q1 we returned approximately $25 million to shareholders, this included $5.5 million as part of our recurring quarterly cash dividend, which we recently increased to $0.16 per share and announced on February 3, 2020. We also repurchased approximately 724,000 shares or $19 million. As of the end of March 2020, we had approximately $210 million available under the current share repurchase program after an increase approved by the Board in February 2020. Because of the uncertain conditions related to COVID-19 we will not provide our usual detailed level next quarter guidance. Approximately 20% of our industrial customers support the oil and gas industry and we expect demand to be softer throughout the balance of the year. Our A&D sector is comprised of approximately 70% defense related product and 30% aerospace. Benchmark Secure Technology has been a Raytheon partner for almost 20 years and we look forward to supporting this expanding strategic relationship across Benchmark. Also given our demand outlook and new program ramp from wins in the past 24 months, we need to maintain critical resource capability, which Roop mentioned as a top priority. We also expect gross margins will recover to the 9% range in the second half of 2020. As a result of some of the actions, we expect that SG&A will be reduced approximately 8% in Q2.

Even considering the challenging environment, we achieved revenue of $515 million in the first quarter, which were supported by strong demand in our Semi-Cap, Medical, and A&D sectors. Our gross margins for the quarter were 8.4% and non-GAAP earnings per share were $0.22. Our GAAP earnings per share for the quarter was $0.10 and our GAAP results included $2.9 million of restructuring and other non-recurring costs in Q1. Non-GAAP earnings per share was $0.22 for the quarter and ROIC was 7.1%. Because of the uncertain conditions related to COVID-19 we will not provide our usual detailed level next quarter guidance.

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When I first started with Extra Space, we had 12 stores and it's incredible to see the exceptional growth of this company, the value we've created for our shareholders. Same-store occupancy set another new high watermark at the end of June at 97%, which is incredible, as you consider the diversification of our national portfolio. The elevated occupancy led to exceptional pricing power with achieved rates to new customers in the quarter over 60% higher than 2020 levels. While this is inflated by an artificially low prior year comp, achieve rates were over 30% greater than 2019 levels and accelerated through the quarter. Other income is no longer a drag on revenue due to late fees improving year-over-year and actually contributed 20 basis points to revenue growth in the quarter. These drivers produced same-store revenue growth of 13.6%, a 900 basis point acceleration from Q1, and same-store NOI growth of 20.2%, an acceleration of over 1,300 basis points. In addition, our external growth initiatives produced steady returns outside of the same-store pool, resulting in FFO growth of 33.3%. Given the pricing we are seeing in the market, we have listed an additional 17 stores for outright disposition, which we expect to close during the back half of 2021. Year-to-date, we have been able to close or put under contract acquisitions totaling $400 million of Extra Space investment. We have increased our 2021 acquisition guidance to $500 million in Extra Space investments. We were active on the third-party management front, adding 39 stores in the quarter and a total of 100 stores through the first six months. In the quarter, we purchased 11 of these stores in the REIT or in one of our joint ventures. Our first half outperformance coupled with steady external growth and the improved outlook for the second half of 2021 allowed us to increase our annual FFO guidance by $0.50 or 8.3% at the midpoint. While we still assume a seasonal occupancy moderation of approximately 300 basis points from this summer's peak to the winter trough, the moderation will begin from a higher starting point than we previously expected. Core FFO for the quarter was $1.64 per share, a year-over-year increase of 33.3%. Despite property tax increases of 6%, we delivered a reduction in same-store expenses in the quarter. These increases were offset primarily by 13% savings in payroll and 31% savings in marketing. In May, we completed our inaugural investment-grade public bond offering, issuing $450 million in 10-year bonds at 2.55%. Our quarter end net debt-to-EBITDA was 4.8 times, giving us significant dry powder for investment opportunities since we generally target a range of 5.5 to 6 times on this metric. We raised our same-store revenue range to 10% to 11%. Same-store expense growth was reduced to 0% to 1%, resulting in same-store NOI growth of 13.5% to 15.5%, a 750 basis point increase at the midpoint. We raised our full year core FFO range to be $6.45 to $6.60 per share, a $0.50 or 8.3% increase at the midpoint. Due to stronger lease-up performance, we dropped our anticipated dilution from value-add acquisitions and C of O stores from $0.14 to $0.12.

Core FFO for the quarter was $1.64 per share, a year-over-year increase of 33.3%. We raised our full year core FFO range to be $6.45 to $6.60 per share, a $0.50 or 8.3% increase at the midpoint.

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For the fiscal first quarter, sales were $5 billion, up 13% year over year. We delivered consolidated adjusted EBITDA of $680 million, up 2% over the same period and adjusted earnings per share came in at $0.65 per share, up 6.6%. During the quarter, we also continued to aggressively buyback stock, repurchasing roughly $100 million worth of stock while maintaining net leverage of 2.4 times, well within our desired range of two and a quarter to two and a half times. corrugated packaging, which includes integrated corrugated converting operations and represented 44% of first quarter sales. Consumer packaging, which includes integrated consumer converting operations and accounted for 23% of first quarter sales. Paper, which includes all third-party paper sales and made up 27% of first quarter sales and distribution which includes our distribution business, which is roughly 6% of sales. Historically, our margins in corrugated have been 18% and 16% in consumer, improving both as a key priority. As a reminder, in Q4 of 2021 and Q1 of 2022, we have repurchased approximately $223 million of stock as an initial down payment on this strategy. With our very strong free cash flow generation and our current valuation level, we intend to get more aggressive on our stock buybacks and are targeting repurchases up to $500 million over the next several months. With over 20 years of experience in corporate strategy, M&A, capital markets, portfolio optimization and broad-based business transformation as well as extensive public company experience, Alex has already proven to be a strong partner. Fiscal first quarter sales were up 13% to $4.95 billion and consolidated adjusted EBITDA increased 2% year over year to $680 million. Consolidated adjusted EBITDA margin was 13.7%. Price and mix positively impacted earnings by $600 million year over year. This higher pricing was mostly offset by $520 million in higher costs, including higher fiber, transportation and labor as well as the impact of the previously discussed high planned maintenance conducted in the quarter. Sales in corrugated packaging, excluding white top trade sales were up 11.5% year over year to $2.1 billion. Adjusted EBITDA declined 17% to $289 million giving the segment an adjusted EBITDA margin of 13.5%, also excluding white top trade sales. Price drove an additional $277 million in adjusted EBITDA year over year. However, this was more than offset by $230 million in inflation due to labor challenges with COVID-related absenteeism and logistics issues as well as $63 million of lower productivity and $43 million of lower volume. During the quarter, our North American box shipments were 3.7% lower year over year, driven by our record mill maintenance levels, COVID-related slowdowns and continued disruptions in the supply chain. Sales were up 7% year over year to $1.1 billion, though adjusted EBITDA declined 3.4% to $169 million in the quarter. Adjusted EBITDA margins were 14.9% for the segment. As in corrugated, better price and mix added $50 million to adjusted EBITDA. Also, improved productivity and better volume drove $14 million and $6 million of higher adjusted EBITDA, respectively. However, higher fiber, transportation and labor costs as well as the high maintenance level negatively impacted earnings with total inflation of $76 million, more than offsetting the other improvements. Revenue for our paper business came in at $1.4 billion, up 24% year over year. Adjusted EBITDA was $232 million with an adjusted EBITDA margin of 17%. Adjusted EBITDA was up an impressive 53% year over year due to price and mix improvements with the flow-through of previously published price increases. Those sales were up 7% to $325 million. Adjusted EBITDA margins fell to 2% from 5.4% last year, mainly due to supply chain issues and the higher cost to service customers driven by higher fuel and labor costs. Finally, we had negative impact from the 401(k) match returning to cash payments rather than stock and the required repayment of the deferred payroll tax as part of the CARES Act. Though the quarter was highly impacted, we still expect to generate cash flows in excess of $1.3 billion as we progress through the year. Though we are past the highest maintenance quarter due to delays in mill maintenance earlier in fiscal 2021, along with our originally planned outages, we still have approximately 128,000 tons of scheduled downtime across our system in the coming months. These assumptions result in forecasted consolidated adjusted EBITDA of $780 million to $830 million and adjusted earnings per share of $0.94 to $1.08 per share. As a note, this guidance does not include any potential benefit from the $70 per ton price increase across our containerboard grades that we have communicated to our customers. Some additional assumptions behind our outlook include OCC costs down $10 to $15 per ton, natural gas costs down sequentially. Labor expense up sequentially due to normal Q2 merit increases, continued inflation in freight and logistics expense, a tax rate of 23% to 25% and diluted shares outstanding of approximately 267 million.

For the fiscal first quarter, sales were $5 billion, up 13% year over year. We delivered consolidated adjusted EBITDA of $680 million, up 2% over the same period and adjusted earnings per share came in at $0.65 per share, up 6.6%.

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Currently, over 98% of our third quarter rental and related charges have been collected. Demand throughout our communities remain strong as evidenced by our 320 basis point improvement in same community occupancy and our 54% sales growth as compared to the same quarter last year. We further demonstrated the success of our business plan by obtaining $106 million of GSE financing at 2.62%. This loan pioneered GSE acceptance of up to 60% rental homes in communities. Subsequent to quarter end, this capital was used to redeem our 8% Series B preferred stock. This 500 basis point improvement will result in over $5 million in additional FFO per year or approximately $0.12 per share. Normalized FFO for the third quarter was $0.18 per diluted share compared to $0.15 in the prior year period. This represents an increase of 20%. We are pleased that our $0.18 dividend per quarter is now fully covered by our current operating performance. Total income for the quarter is up 16%. Year-to-date, total income is up 11%. Our operating expense ratio has decreased from 47.8% to 44.6%. The combination of income growth and expense ratio reduction resulted in overall NOI growth of 17% for the quarter and 19% for the year. Our same-property occupancy rate improved 320 basis points to 86.9% from the same quarter last year. This translates to an increase of 706 revenue-producing sites year-over-year. This occupancy growth has contributed to income growth of 8.6% for the third quarter and 7.8% year-to-date, generating same-property NOI growth of 12.9% and 13.7%, respectively. We have increased our rental home portfolio by 684 units so far this year. We are on track to add 800 to 900 new rental units this year. We now own approximately 8,100 rental homes. At quarter end, our rental home occupancy rate was 95.4%. This line allows us to tap into the equity that we have in our rental homes at a reasonable rate of prime plus 25 basis points. Gross sales for the quarter were $6.8 million, representing an increase of 54% over the same period last year. Gross sales for the year are at $15 million, which is now up 8% over the first three quarters of 2019. Our sales generated income of approximately $640,000 for the quarter and approximately $450,000 for the year. We remain on track to complete the development of 191 sites this year. In 2021, we expect to obtain approvals on approximately 800 sites. We should develop about 400 of these approved sites in the next 18 months. During the quarter, we closed on the acquisition of two communities containing 310 sites for a total purchase price of $7.8 million or $25,000 per site. These are value-add communities with an in-place occupancy rate of 64%. These communities contain approximately 580 sites, of which 64% are occupied. The total purchase price for these communities is $21 million or $36,000 per site. We have covered our $0.18 dividend prior to the positive impact that the redemption and refinance of our Series B preferred will have on earnings. This change in our capital stack is expected to add $0.12 of FFO per share annually. Normalized FFO, which excludes realized gains on the sale of securities and other nonrecurring items, was $7.4 million or $0.18 per diluted share for the third quarter of 2020 compared to $6 million or $0.15 per diluted share for the prior year period. As we had previously announced, we redeemed all 3.8 million issued and outstanding shares of our 8% Series B cumulative redeemable preferred stock totaling $95 million on October 20. This, together with our recent GSE financing, will generate savings of approximately 500 basis points or $0.12 per share annually going forward. Rental and related income for the quarter was $36.4 million compared to $32.9 million a year ago, representing an increase of 10%. Community NOI increased by 17% for the quarter from $17.2 million in 2019 to $20.1 million in 2020. Our operating expense ratio improved from 47.5% for the third quarter of 2019 to 44.7% for the current quarter. For the nine months, our expense ratio decreased from 47.8% to 44.6%. At quarter end, our portfolio average monthly site rent increased by 2.7% to $455 over the same period last year. Our average monthly home rent increased by 2.8% to $781 over the same period last year. Same-property income for the third quarter increased 8.6% over the same period last year, while expenses increased by 3.2%, resulting in same-property NOI growth of 12.9%. Sales of manufactured homes increased 54% for the quarter from $4.4 million in 2019 to $6.8 million in 2020. We sold a total of 108 homes, of which 48 were new home sales and 60 were used home sales. The gross profit percentage improved from 25% for the three months ended September 30, 2019, to 31% for the current quarter. For the nine months, we sold a total of 252 homes, of which 102 were new home sales and 150 were used home sales. The gross profit percentage was 29% and 27% for the nine months ended September 30, 2020 and 2019, respectively. As we turn to our capital structure, at quarter end, we had approximately $507 million in debt, of which $472 million was community level mortgage debt and $35 million was loans payable. 93% of our total debt is fixed rate. The weighted average interest rate on our mortgage debt was 3.81% at quarter end compared to 4.14% in the prior year. The weighted average maturity on our mortgage debt was 6.3 years at quarter end compared to 6.2 years a year ago. At quarter end, UMH had a total of $383 million in perpetual preferred equity, not including the $95 million of our Series B preferred stock, which was redeemed on October 20. Our preferred stock, combined with an equity market capitalization of $564 million and our $507 million in debt, results in a total market capitalization of approximately $1.5 billion at quarter end, representing an increase of 3% over the prior year period. From a credit standpoint, our net debt to total market capitalization was 31%. Our net debt less securities to total market capitalization was 25%. Our net debt to adjusted EBITDA was 5.8 times. Our net debt less securities to adjusted EBITDA was 4.7 times. Our interest coverage was 4.1 times, and our fixed charge coverage was 1.5 times. From a liquidity standpoint, we ended the quarter with $55 million in cash and cash equivalents, $60 million available on our unsecured credit facility with an additional $50 million potentially available pursuant to an accordion feature and $29 million available on our revolving lines of credit for the financing of home sales and the purchase of inventory. We also had $85 million unencumbered in our REIT securities portfolio. This portfolio represents approximately 6% of our undepreciated assets. We limit our portfolio to no more than 15% of our undepreciated assets. Through our preferred and common stock ATM programs, we raised net proceeds of $9.8 million during the quarter and $73 million during the nine months. Subsequent to quarter end, we raised an additional $14.2 million through these programs. Additionally, as Sam mentioned, in October, we entered into a $20 million line of credit with FirstBank secured by our rental homes and the income derived by them. This line is expandable to $30 million with an accordion feature. In conjunction with the Series B preferred stock redemption, subsequent to quarter end, we drew down $30 million on our unsecured credit facility and $26 million on our margin line. We have been incredibly pleased with the performance of our portfolio of 124 communities. We have built a much needed important housing company over our 53 year history.

Normalized FFO for the third quarter was $0.18 per diluted share compared to $0.15 in the prior year period. We are pleased that our $0.18 dividend per quarter is now fully covered by our current operating performance. We have covered our $0.18 dividend prior to the positive impact that the redemption and refinance of our Series B preferred will have on earnings. Normalized FFO, which excludes realized gains on the sale of securities and other nonrecurring items, was $7.4 million or $0.18 per diluted share for the third quarter of 2020 compared to $6 million or $0.15 per diluted share for the prior year period.

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Rent collections, for example, during April and May were 35%, that grew to 80% in the third quarter. And as of today, the fourth-quarter rent collections were at 92% and rising by the week. Currently, 10% of the U.S. population has had at least one dose of the vaccine, and distribution is accelerating. In fact, December sales were approaching 85% of pre-COVID levels even in the midst of a surge in COVID cases. The result is our occupancy level is at 90%, which is the lowest since the Great Financial Crisis. Of our 27 JCPenney locations, only two locations closed, Green Acres and Kings Plaza, both in New York. Rent collections have improved significantly, up from a September collection rate of 77%, and are now above 90% in the fourth quarter. January is also trending above 90%. We have come to agreement on COVID workouts with over 93% of our top 200 tenants. Volumes, in fact, were 90% of pre-COVID levels of the fourth quarter of 2019. Our 2021 lease expirations are 60% leased today, with the majority of the balance in the letter of intent stage. Retailer traffic and sales continue to pick up with traffic at 80% of pre-COVID traffic and sales, on average, 85% of pre-COVID levels. 1 Global Real Estate Sustainability Benchmark Ranking in the North American retail sector. Funds from operations for the fourth quarter was $0.45. That's down from the fourth quarter of 2019 at $0.98 per share. Same-center net operating income for the quarter was down 33%, and year to date is down 22%. One, $38 million decline from COVID-related rent abatements across permanent and temporary leasing revenue line items. Fourth-quarter abatements were elevated relative to the third-quarter abatements of $28 million, and this was largely due to the protracted summer closures of several large properties in New York and in California. Cumulatively for the year, in 2020, we granted $56 million of abatements. Number two, $19 million of COVID-related decline in common area and ancillary revenues, including specialty leasing and temporary tenant revenue, percentage rent revenue, business development revenue, and parking revenue. In total, for all of 2020, these line items were down $43 million. Number three, general top-line revenue decrease is totaling approximately $12 million, driven primarily by COVID-related occupancy decreases. Number four, $6 million of bad debt expense in the form of reversals of lease revenue for tenants on a cash basis pursuant to GAAP, that was about $5 million, and then bad debt expenses of about $1 million. As a result of the COVID-related disruption to our business, the bad debt expense line item was significantly elevated in 2020 at $62 million. This was a $52 million increase versus $10 million of bad debt expense in 2019. Number five, there was an $8 million decrease from loss or gain on un-depreciated asset sales or writedowns on consolidated assets. This included a $5 million impairment charge in the fourth quarter of 2020 for undeveloped land that is currently under contract for sale and is expected to close in 2021. And lastly, offsetting these items, straight-line rent increased $19 million in the fourth quarter. So to summarize some of the major impacts of COVID that impacted real estate NOI in 2020, and again, all these figures are at the company's share, we highlight the following: number one, $56 million of one-time retroactive abatements of rent. Number two, a $43 million of decline in common area and ancillary revenues, percentage rent and temporary -- or excuse me, and parking revenues. And number three, we wrote-off an extra $52 million of bad debt expense relative to 2019. Plus, in addition, we had another $11 million of rent that was reversed for tenants that are accounted for on a cash basis. So when you add all that up, collectively, it's roughly $162 million of pandemic-driven NOI decline just among those three categories. 2021 FFO is estimated in the range of $2.05 per share to $2.25 per share. In terms of FFO by quarter, we estimate the following cadence: 21% in the first quarter, 24% in 2Q, 25% in 3Q, and the balance 30% in the last quarter. Trough occupancy appears to have been contained to roughly 88%, which we estimate to be at the end of the first quarter. As addressed in detail within our recent filings, over the last few months, we have successfully extended four secured mortgage loans, totaling over $660 million for extension terms ranging up to three years. The loan is a $95 million mortgage loan, bearing fixed interest at 3.3% for 10 years. At closing, this generated $45 million of incremental liquidity to the company, and there is some incremental funding capacity remaining under this line item. Cash on hand at year-end was $555 million. As Tom previously noted, collection efforts are now over 90%. And in addition, we estimate the collections of both contractually deferred and delayed rent collections in 2021 that relate to 2020 billed rents in the approximate range of $60 million to $75 million. During 2021, we expect to generate over $200 million of cash flow from operations, and this is after recurring operating and leasing capital expenditures and after dividend. And as for development, we expect to spend less than $100 million in 2021, excluding further development expenditures on One Westside, which recall, is independently funded by a construction loan facility. Looking at our top 200 rent-paying national retailers, we now have commitments with 176, which is up considerably from last quarter. But more importantly, we now have received payments, or we've worked out deals totaling 93% of the total rent these top 200 pay. As of today, collection rates increased to 89% in the third quarter and 92% in the fourth quarter of 2020. Occupancy at the end of the third quarter was 89.7%, that's down 110 basis points from last quarter and down 4.3% from a year ago. Temporary occupancy was 5.9%, and that's down 50 basis points from this time last year. Trailing 12-month leasing spreads were a negative 3.6%, and that's down from 4.9% last quarter and down from 4.7% in 2019. Average rent for the portfolio was $61.87 as of December 31, 2020, and this represents a 1.3% increase compared to $61.06 as of December 31, 2019, and a 0.7% decrease compared to $62.29 at September 30, 2020. And to date, we have commitments on 60% of our expiring square footage, with another 40%, or the balance, in the letter of intent stage, disregarding tenants who have closed or have indicated they intend to close. In the fourth quarter, we signed 217 leases for 900,000 square feet. This represents 80% more leases and 1.5 times the square footage when compared to the third quarter of 2020. This also represents 90% of the square footage that we signed in the fourth quarter of 2019. We opened 59 new tenants in 236,000 square feet, resulting in a total annual rent of over $10 million. In the large-format category, we opened DICK's Sporting Goods at Vintage and Round 1 at Deptford Mall, both in former Sears locations. We already have signed leases totaling approximately 494,000 square feet, all scheduled to open in 2021, and this list continues to grow. Later this year, we look forward to opening an amazing two-level, 11,000-square-foot flagship Dior store at Scottsdale Fashion Square, the first and only Dior in all of Arizona. Primark is well under construction and will open its highly anticipated 50,000 square foot store at Fashion District Philadelphia in September of this year. And when we look at deals still in lease negotiation, we have yet another 435,000 square feet to open in 2021, and this number grows daily.

Funds from operations for the fourth quarter was $0.45. 2021 FFO is estimated in the range of $2.05 per share to $2.25 per share. Occupancy at the end of the third quarter was 89.7%, that's down 110 basis points from last quarter and down 4.3% from a year ago.

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Unfortunately, even with the increase in new business policies that we experienced outside of California in 2020, our new business premium has fallen driven primarily by significant declines in payrolls and declines in the number of policies with annual premiums greater than $25,000. As a result, we reduced our current accident year loss and LAE ratio to 64.3% during the fourth quarter from the 65.5% maintained throughout the prior 21 months. We also reduced our prior accident year loss and LAE reserves by nearly $40 million during the quarter which related to nearly every prior accident year. For the year, we delivered a 7.6% return on adjusted equity and increased our book value per share, including the deferred gain by more than 15%. Our net premiums earned were $152 million, a decrease of 11% year-over-year. Our loss and loss adjustment expenses were $48 million, a decrease of 51% year-over-year due to the current and prior-year favorable loss reserve development that Kathy spoke to previously as well as the decrease in earned premiums. Commission expenses were $19 million for the quarter, a decrease of 7% year-over-year. Underwriting and general administrative expenses were $43 million for the quarter, a decrease of 15% year-over-year. From a segment reporting perspective, our Employers segment had underwriting income of $45 million for the quarter versus $8 million a year ago and its combined ratios were 70% and 96% respectively. Our Cerity segment had an underwriting loss of $5 million for the quarter, consistent with its underwriting loss of a year ago. Net investment income was $18 million for the quarter, down 20%. At quarter-end, our fixed maturities had a duration of 3.2 and an average credit quality of A+ and our equity securities and other investments represented 8% of the total investment portfolio. We were favorably impacted by $5 million of after-tax unrealized gains from fixed maturity securities, which are reflected on our balance sheet and $15 million of net after-tax unrealized gains from equity securities and other investments, which are reflected on our income statement. These net unrealized investment gains contributed to our nearly 6% increase in our book value per share including the deferred gain this quarter. During the quarter, we repurchased $17 million of our common stock at an average price of $32.50 per share and we have repurchased an additional $10 million of our common stock thus far in 2021 at an average price per share of $32.19. Our remaining share repurchase authority currently stands at $19 million. Yesterday, the Board of Directors declared a first quarter 2021 dividend of $0.25 per share, which is payable on March 17th to stockholders of record as of March 3rd. Net written premiums for the year of $575 million were down $117 million or 16.9% from the prior year. New business premium decreased 33.3% despite increases in submissions, quotes and bound policies. Submissions were up 3.7% year-over-year, quotes were up 7.4% and bound policies were at 0.2% growth. On a year-over-year basis, our in-force policy count increased by 4.8%. New business submissions were down 10% from the comparable periods in 2019 and were down as much as 23% in some industries. However, renewal premium for the year decreased 3.6%. It's been my pleasure to lead Employers for over 27 years and I believe that the Company is in the strongest financial position in its 108-year history.

Our net premiums earned were $152 million, a decrease of 11% year-over-year. Yesterday, the Board of Directors declared a first quarter 2021 dividend of $0.25 per share, which is payable on March 17th to stockholders of record as of March 3rd.

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We estimate the weak winter weather season in both the first quarter and fourth quarter of last year negatively impacted our full-year 2020 operating income by approximately $40 million to $45 million. In addition, our South American Plant Nutrition business experienced stronger year-over-year agriculture sales volumes and, in local currency, achieved a 16% increase in fourth quarter operating earnings versus 2019. However, the Brazilian currency weakened by approximately 33% during the year compared to the U.S. dollar, which ultimately hurt our bottom-line in terms of U.S. results. As we look at full year 2020 on a consolidated basis, net income for the year decreased by approximately 5% and adjusted EBITDA decreased by approximately 8% when compared to 2019 results. On the positive side, we continue to generate strong positive cash flow from operations totaling over $175 million for the full year. We also took an aggressive approach to managing our capital plan and I'm pleased we were able to come in 13% below the midpoint of our original guidance for a total spend of roughly $85 million for the year. Our free cash flow for the full year was just over $90 million and we returned at $99 million to shareholders through our dividend program, which reflects our confidence in the company's ability to deliver cash flow through varying economic and weather-related cycles. Full-year adjusted EBITDA margins increased approximately 3 percentage points to 29% despite our adjusted EBITDA being lower by 2%. On a full year basis, production tons out of Goderich have increased 17% from 2019 results and production costs are down 16%. These storms resulted in approximately 11 lost production days during the year. Our team worked to ensure we were well-positioned to capture those sales volumes in the fourth quarter, ultimately, delivering strong year-over-year revenue growth of 16%. Our South American Plant Nutrition business continued to achieve measured growth in local currency, with sales revenue up 18% for the full year 2020. During its initial year in this new structure, the department executed over 65 initiatives, driving as much as 10% annualized savings in a number of specific procurement categories such as contractor services, packaging raw materials and equipment spare parts. In addition to achieving a multi-year low for our 12 months rolling TCIR average in 2020, we ended the year with an average of 1.53 and I'm happy to share that our TCIR in December was among the lowest of any month in the history of the company, coming in at 1.23. We now estimate a combined negative impact to our original operating earnings forecast of roughly $67 million due specifically to weak winter weather in both the first and fourth quarters, a Brazilian currency that progressively weakened throughout the year and COVID-19 impacts, including both cost preventative measures at our sites and reduced demand within certain higher-margin end markets. For the full year, sales revenue and operating income were also lower as we dealt with over $100 million in sales revenue impact and more than $40 million of operating earnings and tax due to weak winter weather. Total sales in the quarter were $228.5 million, down from $310.9 million in the fourth quarter of 2019, largely due to lower weather-driven demand for deicing products and the effects of customer carryover inventories. Total Salt segment sales volumes dropped to 23% compared to fourth quarter of 2019. Within our Salt segment, highway deicing experienced a 25% sales volume decline and consumer and industrial sales volumes dropped 16% year-over-year. Highway deicing prices were down 11% versus the prior year quarter at $59.20 per ton. However, consumer and industrial average selling prices increased 1% to $169.30 per ton as a broad-based price increases across all non-deicing product groups was mostly offset by lower sales mix of our higher priced deicing products. Operating earnings for the Salt segment totaled $50.2 million for the fourth quarter versus $80.5 million last year, while EBITDA for the Salt segment totaled $67.6 million compared to $96.5 million in the prior year quarter. When stepping back and looking at our fourth quarter Salt costs, we ended up at $41 per ton, which is flat with the 2019 fourth quarter. However, on a mix-adjusted basis, our unit cost is about $1.25 per ton lower than prior year. So we absorbed a 25% decline in year-over-year fourth quarter Salt sales volume and we were still able to decrease our mix adjusted Salt unit costs versus the prior year. Improved production and logistics costs in our North American highway business for the full year 2020 helped to offset a 12.4% lower salt revenue and resulted in adjusted operating income declining just 6% and an adjusted EBITDA decrease of only 2% year-over-year. These efforts contributed to the expansion of the Salt segment adjusted operating margin to nearly 21% from about 19% last year and, at the same timem driving adjusted EBITDA margin to 29.3% compared to 26.1% for the full year 2019. Fourth quarter total sales revenue increased 15.9% from the prior year to $88.7 million. We achieved this by delivering a 23% increase in sales volumes, partially offset by a 6% lower average selling prices. In turn, our Plant Nutrition North America EBITDA margin compressed to about 20% in the quarter compared to nearly 34% in the prior year, with operating margins declining about 10 percentage points quarter-over-quarter. Strong full year sales volumes, partially offset by lower sales prices, helped us deliver a 16.2% improvement in 2020 full year Plant Nutrition North America revenue versus 2019. These revenue results, coupled with the short-term fourth quarter cost pressure and the previously disclosed $7.4 million inventory adjustment in the third quarter, resulted in a $10.4 million decline in operating income and a $14.6 million decrease in full-year EBITDA. Excluding the inventory adjustment, full-year operating margin would have been 8.1% compared to 10.9% in 2019, while full-year EBITDA margin would have been 25% versus 32.5% last year. Our Plant Nutrition South America segment delivered a 24% year-over-year increase in fourth quarter 2020 revenue and an 18% increase for the full year, both in local currency. Fourth quarter agro revenue was up about 29% versus 2019 and up nearly 23% for the full year. Even more impressive was our fast growing Ag B2C business unit where strong sales volumes and price drove a 37% increase in both our 2020 fourth quarter and full year revenue when compared to prior year, again, all in local currency. In local currency, our Plant Nutrition South America fourth quarter and full year 2020 operating earnings increased 16% and 35%, respectively, while EBITDA increased in lockstep by 15% and 25%, as well. While we're obviously disappointed with our fourth quarter and full year 2020 results, it's important to again point out that the combination of weak winter weather, Brazilian currency devaluation and COVID-19 impacts in both mitigation costs and end market deterioration negatively affected our 2020 full-year operating income by nearly $70 million. Despite this impact, we were able to hold year-over-year adjusted EBITDA margins flat at 21% and generate more than $175 million cash flow from operations and $90 million of free cash flow. For the full year 2021, we are expecting consolidated adjusted EBITDA of between $330 million and $360 million, which is a year-over-year increase of about 20%. While the midpoint of our guidance is at the lower end of last year's full-year guidance, it's important to note that weak winter weather impacts, like those in 2020, are never immediately reset as prior bid season pricing almost always has a significant influence on the following years' average selling prices. Our annual operating plan anticipates approximately $100 million in 2021 capital spending, as well as free cash flow at levels similar to 2020. While our net debt to adjusted EBITDA ratio ended 2020 at about 4.3 times, it is expected to end 2021 below 4 times.

While the midpoint of our guidance is at the lower end of last year's full-year guidance, it's important to note that weak winter weather impacts, like those in 2020, are never immediately reset as prior bid season pricing almost always has a significant influence on the following years' average selling prices.

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Our appreciation and recognition also extends to our 700 plus employees and their utility industry peers across the nation, who we consider to be essential as they continue to deliver safe and reliable service. Our dedicated and passionate water professionals met the challenges of 2020 head on to provide a reliable supply of safe drinking water to more than 1.6 million people in our local service communities in California, Connecticut, Texas and Maine. In my 38 years in this profession, it never mattered more. For example, in 2020, San Jose Water was responsible for $28.8 million of diverse supplier spend, representing 30.1% of our addressable spend there. Other highlights of 2020 include investing more than $199 million in our water and wastewater systems across our multistate footprint, achieving world-class customer satisfaction on a composite basis across the Company and another successful year of meeting drinking water and environmental regulations, delivering on our commitment to public health and environmental stewardship. Fourth quarter revenue was $135.7 million, a $9.9 million increase over reported fourth quarter 2019 revenue. Net income for the quarter was $13.3 million or $0.46 per diluted share. This compares with a net loss of $5.5 million or $0.19 per diluted share for the fourth quarter of 2019. Diluted earnings per share for the quarter reflects lower CTWS merger expenses of $0.36 per share, higher customer usage of $0.22 per share and lower administrative and general expenses of $0.19 per share due to lower integration costs. These increases were partially offset by an increase in production costs due to higher usage of $0.10 per share and a decrease of $0.05 per share due to lower local surface water availability in Northern California. Turning to our comparative analysis for the quarter, our $9.9 million revenue increase was primarily due to increased customer usage of $6 million and $1.4 million in cumulative rate increases. In addition, we recorded $2.8 million in customer rate credits in the fourth quarter of 2019 as a result of regulatory commitments we made in connection with the merger. Water production expenses increased $3.6 million compared to the fourth quarter of 2019. The increase included $2.6 million in higher customer usage and $1.5 million for the purchase of additional water supply necessary to supplement California surface water. Other operating expenses decreased $12 million during the quarter, primarily due to lower merger-related expenses of $9.7 million and lower general and administrative expenses of $5.1 million due to lower merger-related integration costs. These decreases were partially offset by $2.5 million in higher depreciation expense. The effective income tax rate for the fourth quarter was a negative 7% compared to 6% for the fourth quarter of 2019. Turning to our annual results, 2020 revenue was $564.5 million, a 34% increase over the same period last year. Net income in 2020 was $61.5 million or $2.14 per diluted share compared to $23.4 million or $0.82 per diluted share during the same period in 2019. CTWS customer usage contributed $2.83 per share and customer usage from our other operations increased $0.59 per share. Due to the timing of when the merger transaction closed in 2019, we only recorded $0.01 per share of earnings from CTWS in 2019. In addition, 2019 non-recurring merger costs contributed $0.48 per share and the WCMA write-off in 2019 contributed $0.29 per share. These increases were partially offset by increased production costs of $1.04 per share due to higher usage, a net increase in interest on long-term debt of $0.86 per share due primarily to merger-related debt, and 2020 note issuances and a decrease in local surface water availability in Northern California of $0.58 per share. Our 2020 increase in revenue was primarily due to $111.2 million in increased customer usage, $12.2 million in cumulative rate increases and $2.7 million from new customers. Water production expenses increased $50 million in 2020. The increase was primarily due to $33.9 million in higher customer water usage from the addition of CTWS and drier weather, and a $19 million increase due to lower surface water supplies. This increase was partially offset by $3.4 million of increase in California cost recovery balancing and memorandum accountants. Other operating expenses increased $33.9 million in 2020, primarily due to a $23.7 million increase in depreciation expense, $13.4 million in higher general and administrative expenses and $10.8 million in higher property and other non-income taxes. In addition, in 2019, we incurred $15.8 million in merger expenses related to the merger transaction. Other income and expense for the year included $13 million of new interest on SJW Group's $510 million senior notes, which were issued in October of 2019 and a $50 million senior note issued by SJW Group in August of 2020, as well as $8 million of interest expense on CTWS financings. Other expense and income in 2019 included $6.5 million of interest income earned on the proceeds of the Company's December 2018 equity offering. Turning to our capital expenditure program, we added approximately $65 million in Company-funded utility plant in the fourth quarter of 2020, bringing total Company-funded additions to $199.3 million. Our 2020 cash flows from operations decreased approximately $25.9 million over the same period in 2019. The decrease was primarily due to the authorized collection of $45.3 million of balancing and memorandum accounts in 2019, a decrease in collections of previously billed and accrued receivables of $15 million, a decrease in other non-current assets and liabilities of $12.4 million and a $50 million upfront payment we made to the city of Cupertino in connection with our service concession agreement. These decreases were partially offset by a $51.8 million increase in net income adjusted for non-cash items. SJWC has determined that future recovery of the account is probable and recognized a regulatory asset of $2.3 million in the SEMA-related to COVID-19 for the year ended December 31, 2020. At the end of 2020, we had $84.9 million available on our bank lines of credit for short-term financing of utility plant additions and operating activities. The average borrowing rate on line of credit advances during 2020 was approximately 1.78%. In the last decade alone, more than $1 billion has been invested in the local water systems of the communities that we serve. In 2021, SJW Group's subsidiaries plan to invest $239 million in infrastructure improvements to serve our customers in California, Connecticut, Maine and Texas. Over $1 billion is planned across the organization over the next five years. San Jose Water's GRC application proposes a $435 million capital program for the years 2021 through 2023, supported by our award-winning enterprise asset management plan. The process is expected to take about 12 months, and new rates are anticipated in January 2022. A primary driver of the case is the $266 million in infrastructure investments that have been completed and are providing a benefit to customers but are not yet covered in rates. Earlier this year, PURA approved a 1.1% increase in infrastructure surcharges through the water infrastructure and conservation adjustment program, or WICA, this request covers $8.7 million in qualified infrastructure investments with incremental annual revenue of about $1 million. The increases were effective on January 1, recognizing $3.5 million in critical infrastructure investments and increasing revenues by about $300,000. Our operation located in the fast-growing region in between Austin and San Antonio, serves 20,000 customer connections. To achieve our goals, we are working diligently to support the growth of our Texas Water Utility, which has more than tripled in size through organic growth and acquisitions since 2006, increased our capital investments to deliver safe and reliable service to our local communities and grow the rate base for all of our operating entities and continue to seek acquisition opportunities that create value for our stakeholders. The prudent management of our business and financial resources continues to be fundamental to our growth and ability to return capital to shareholders, demonstrating the Company's strong commitment to our shareholders in January 2021, the Board authorized a 6.3% increase in SJW Group's 2021 dividend to $1.36 per share as compared to the total dividends paid in 2020. We're proud to have continuously paid a dividend for over 77 years and to have increased that annual dividend in each of the last 53 years, delivering value to our shareholders.

Fourth quarter revenue was $135.7 million, a $9.9 million increase over reported fourth quarter 2019 revenue. Net income for the quarter was $13.3 million or $0.46 per diluted share.

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Organic growth for the second quarter was a positive 24.4%. EBIT was $568 million in the quarter, an increase of 67% versus the second quarter of 2020. Q2 2021 included a gain of $50.5 million from the sale of ICON International in early June. In Q2 2020, EBIT included $278 million of charges related to the repositioning actions. Excluding gains and charges, EBIT margin was 14.5% in the quarter compared to 12.2% in Q2 2020. Excluding the sale of ICON, our six months 2021 EBIT margin was 14% which is in line with our EBIT margin of 13.9% for the first six months of 2019. Net income was $348 million in the second quarter, an increase of 75% from the second quarter of 2020 and earnings per share was $1.60 per share, an increase of 74%. The net impact on the gain on the sale of ICON, which was offset by an interest expense charge related to the early retirement of debt increased earnings per share in Q2 2021 by $0.14 per share. The U.S. was up just shy of 20% in the quarter. Other North America was up 37.1%, the U.K. was up 23.8% with all disciplines in double-digits. Overall growth in the Euro and non-Euro region was 34.5%. In Asia Pacific, we had 27.9% increase with all major countries experiencing double-digit growth. Latin America was up 20.8% and the Middle East and Africa increased 42.8%. By discipline, all areas were up year-over-year as follows: Advertising and media 29.8%; CRM Precision Marketing, 25%; CRM Commerce and Brand Consultancy 15.2%; CRM Experiential 53%; CRM Execution and Support 22.7%; PR 15.1% and Healthcare 4.5%. For the first half of the year, we generated approximately $800 million in free cash flow. In the second quarter, we repurchased $102 million in shares. In late April, we issued $800 million of senior notes due in 2031. The proceeds from this issuance together with cash on hand were used to repay $1.25 billion of senior notes due in 2022. Omnicom's global creative networks BBDO, DDB, and TBWA placed in the Top 10 of the network over the festival competition taking the highly coveted title, AMV BBDO was named Agency of the Festival. Omnicom media agencies, PHD and OMD earned first and second place respectively in the Media Network of the Festivals competition and overall, more than 160 Omnicom agencies from 45 countries won more than 180 Lions. For example, several of our U.K. agencies have joined Ad Net Zero, the industry's initiative to achieve real net zero carbon emissions from the development, production, and media placement of advertising by the end of 2030 and we are a founding member of Change the Brief Alliance, which calls for the agencies and marketers to harness the power of their advertising to promote sustainable consumer choices and behaviors. Another critical area we have intensified our efforts over the past 12 months is DE&I. Currently, our Board is the most diverse in the S&P 500 with six women and four African American members including our Lead Independent Director. We're also pleased that three of our 12 network and practice area CEOs are people of color or female. While it is still too early to measure our progress, I'm pleased to report that a preliminary review of our employee diversity in the United States shows a meaningful increase in the number of diverse employees as of June 30th, 2021 compared to the end of 2020. Organic growth for the quarter was 24.4% or $682 million, which represents a significant increase compared to Q2 of 2020 which reflected the onset of the pandemic when revenue declined by 23% or $855 million. In addition, in early June, we completed the disposition of ICON, our specialty media business, which resulted in a pre-tax gain of $50.5 million. In addition to our organic revenue growth of 24.4% for the quarter, the impact of foreign exchange rates increased our revenue by 5.4% in the quarter, higher than we anticipated entering the quarter as the dollar continued to weaken against most of our larger currencies compared to the prior year. The impact on revenue from acquisitions, net of dispositions decreased revenue by 2.2% primarily related to the sale of ICON. As a result, our reported revenue in the second quarter increased 27.5% to $3.57 billion from the $2.8 billion we reported for Q2 of 2020. Turning back to Slide 1, our reported operating profit for the quarter increased to $568 million including the $50.5 million gain on the sale of ICON. As you remember, our Q2 2020 results included a $278 million COVID-19 repositioning charge, which included severance actions, real estate lease impairments and terminations and related fixed asset charges as well as a loss on the disposition of several small non-core underperforming agencies. Our operating margin for the quarter was 15.9%, up significantly from Q2 2020 even after excluding the gain on the sale of ICON in the current period and adding back the repositioning charge recorded in Q2 of 2020. Our reported EBITDA for the quarter was $590 million and EBITDA margin was 16.5%. Excluding the $50.5 million gain on the ICON disposition, EBITDA margin for Q2 2021 was 15.1%. EBITDA margin in Q2 of 2020 after adding back the $278 million repositioning charge, was 12.9%. We've also included a supplemental slide on Page 15 that shows the 2021 amounts presented in constant dollars to exclude the effects of the year-on-year FX changes. They increased by about $300 million versus Q2 of 2020 or $220 million on a constant dollar basis driven by the increase in our overall business activity. We would also note that the Q2 2020 salary and service cost amounts were reduced by reimbursements received from government programs of $49.2 million. Third-party service costs increased by $275 million or $242 million on a constant dollar basis. Occupancy and other costs, which are not directly linked to changes in revenue, increased by $4 million. Excluding the impact of FX, these costs declined by $10 million in the quarter as we continued our efforts to reduce infrastructure costs and we benefited from a decrease in general office expenses as the majority of our staff continue to work remotely in Q2. SG&A expenses increased by $21 million or $18 million on a constant dollar basis, again related to the return to more normal activities in the quarter. And finally, depreciation and amortization declined by $3.6 million. Net interest expense in the second quarter of 2021 increased $26.3 million period-over-period to $73.5 million. Because of our solid working capital and cash flow performance during the pandemic period, in Q2 we determined we no longer needed the liquidity insurance we added in early April 2020 when we issued $600 million in debt and added a $400 million 364-day revolving credit facility. In May, we issued $800 million of 2.6% senior notes due 2031. In June, the proceeds from the issuance of the 2.6% notes plus cash on hand were used to redeem early all of our outstanding $1.25 billion 3.625% notes that were due in May of 2022. Gross interest expense in the second quarter of 2021 increased $26.6 million resulting from the loss we recognized on the early redemption of all the outstanding $1.2 billion of 3.625% 2022 senior notes. Additionally, the impact of this refinancing activity reduced our leverage ratio to 2.2 times at June 30th, 2021 and is expected to result in lower interest expense on our debt in the second half of approximately $6 million as compared to the prior year. Our effective tax rate for the second quarter was 24.9%, down a bit from the effective tax rate we estimated for 2021 of between 26.5% to 27% primarily due to nominal taxes recorded on the book gain on sale. Earnings from our affiliates was marginally negative for the quarter while the allocation of earnings to minority shareholders of certain of our agencies increased to $23.4 million. As a result, we reported net income for the second quarter was $348.2 million. While we restarted our share repurchase program during the second quarter, our diluted share count for the quarter increased slightly versus Q2 of last year to 217.1 million shares resulting from the year-over-year increase in our share price and the increase in common stock equivalents included in our diluted share count. As a result, our diluted earnings per share for the second quarter was $1.60 versus the loss of $0.11 per share we reported in Q2 of 2020. The gain on the sale of ICON and the loss on the early redemption of the 2022 senior notes resulted in a net increase of $31 million to net income or $0.14 to EPS. As we previously discussed, the prior year period included the net impact of the repositioning charges which reduced last year's second quarter net income and earnings per share by $223.1 million and a $1.03 respectively. Now returning to the details of the changes in our revenue performance on Slide 4, our reported revenue for the second quarter was $3.57 billion, up $771 million or 27.5% from Q2 of 2020. Turning to the FX impact, on a year-over-year basis, the impact of foreign exchange rates increased our reported U.S. dollar revenue by 5.4% or $150.8 million, which was above the 3.5% to 4% increase that we estimated entering the quarter. In light of the weakening of the U.S. dollar compared to 2020, assuming FX rates continue where they currently stand, our estimate is that FX could increase our reported revenues by approximately 1.5% for the third quarter and 1% for the fourth quarter resulting in a full year projected increase of approximately 2.5%. The impacts of our acquisition and disposition activities over the past 12 months primarily reflecting the ICON disposition as well as the recent acquisitions of Archbow and Areteans, during the second quarter of 2021 resulted in a net decrease in revenue of $62 million in the quarter or 2.2%. Based on transactions that have been completed through June 30th of 2021, our estimate is the net impact of our acquisition and disposition activity for the balance of the year will decrease revenue by between 6% to 7% for the third and fourth quarters resulting in a full year reduction of approximately 4%. Our organic growth of $682 million or 24.4% in the second quarter reflects strong performance across all of our major geographic markets and across all of our service disciplines. Turning to our mix of business by discipline on Page 5, for the second quarter, the split was 56% for advertising and 44% for marketing services. As for the organic change by discipline, advertising was up nearly 30% primarily on the growth of our media businesses reflecting a strong recovery of activity within the media space. CRM Precision Marketing increased 25%. CRM Commerce and Brand Consulting was up 15.2% but the performance within this discipline was mixed as our shopper marketing agencies cycled through the effects of recent client losses. While organic revenue for CRM Experiential was up over 50%, it should be noted that events were virtually shut down as lockdowns took effect in March and April of 2020. CRM Execution & Support was up 22.7% reflecting a recovery in client spend compared to Q2 of 2020 in our field marketing and merchandising and point-of-sale businesses while our non-for-profit businesses continue to lag. PR was up 15.1% coming off pandemic lows in 2020. And finally, our Healthcare discipline was up 4.5% organically. Now turning to the details of our regional mix of businesses on Page 6. You can see the quarterly split was 51.5% in the U.S.; 3.3% for the rest of North America; 10.6% in the U.K.; 18.6% for the rest of Europe; 12.5% for Asia Pacific; 2% for Latin America; and 1% [Phonetic] for the Middle East and Africa. In reviewing the details of our performance by region on Page 7, organic revenue in the second quarter in the U.S. was up nearly 20% or $316 million. Our media agencies excelled in the quarter as did our CRM Precision Marketing agencies and our PR agencies and our Commerce and Brand Consulting category rebounded to growth in the quarter while our Healthcare agencies are flat versus last year when organic growth was 3.7% in the quarter. Outside the U.S., our other North American agencies are up 37% driven by the strength of our media and precision marketing agencies in Canada. Our U.K. agencies were up 23.8% organically led by the performance of our CRM Precision Marketing, Advertising, and Healthcare agencies. The rest of Europe was up 34.5% organically. In the Eurozone, among our major markets, France, Germany, Italy and The Netherlands were up greater than 30% organically while Spain was up in the mid-single digits. Outside the Eurozone, organic growth was up around 35% during the quarter. Organic revenue performance in Asia Pacific for the quarter was up 27.9% with our performance from our agencies in Australia, Greater China, India, and New Zealand leading the way. Latin America was up 20.8% organically in the quarter with our agencies in Mexico and Colombia growing more than 20% and Brazil was up almost 17%. And lastly, the Middle East and Africa was up over 40% for the quarter. On Slide 9, you can see that the first six months of the year, we generated nearly $800 million of free cash flow excluding changes in working capital, up over $70 million versus the first half of last year. As for our primary uses of cash on Slide 10, dividends paid to our common shareholders were $292 million, up about $10 million when compared to last year due to the $0.05 per share increase in the quarterly payments effective with the dividend payment we made in April. Dividends paid to our non-controlling interest shareholders totaled $39 million. Capital expenditures in the first half of 2021 were $23 million. Acquisitions, which include our recently completed transactions as well as earnout payments, totaled $36 million and stock repurchases were $95 million, net of the proceeds from our stock plans reflecting the resumption of our share repurchases during the second quarter of this year. As a result of our continuing efforts to prudently manage the use of our cash, we were able to generate $311 million of free cash flow during the first half of the year. Regarding our capital structure at the end of the quarter as detailed on Slide 11, our total debt is $5.31 billion, down about $410 million since this time last year and down just over $500 million compared to year-end 2020. Both changes reflecting the early retirement in Q2 of 2021 of $1.25 billion of 3.65% senior notes which were due in 2022 partially replaced with the issuance of $800 million of 2.6% 10-year notes due in 2031. In addition to the net reduction in debt of $450 million from the refinancing, the only other meaningful change was the net balance for the LTM period, was an increase of approximately $65 million resulting from the FX impact of converting our EUR1 billion denominated borrowings into U.S. dollars at the balance sheet date. Our net debt position as of June 30th was $922 million, up about $710 million from last year-end, but down $1.5 billion when compared to where we stood 12 months ago. The increase in net debt since year-end was a result of the typical uses of working capital that occur over the first half of the year totaling just under $1.1 billion which was partially offset by the $311 million we generated in free cash flow in the first half of the year. Over the past 12 months, the improvement in net debt is primarily due to our positive free cash flow of $790 million, positive changes in operating capital of $525 million, and the impact of FX on our cash and debt balances which decreased our net debt position by $154 million. As for our debt ratios, as a result of our overall operating improvement versus Q2 of 2020 and our recent refinancing activity, we've reduced our total debt to EBITDA ratio to 2.2 times and our net debt to EBITDA ratio to 0.4 times. And finally, moving to our historical returns on Page 12, the last 12 months our return on invested capital ratio was 25.9% while our return on equity was 46.8%, both significantly better than our returns from 12 months ago.

Organic growth for the second quarter was a positive 24.4%. Net income was $348 million in the second quarter, an increase of 75% from the second quarter of 2020 and earnings per share was $1.60 per share, an increase of 74%. While it is still too early to measure our progress, I'm pleased to report that a preliminary review of our employee diversity in the United States shows a meaningful increase in the number of diverse employees as of June 30th, 2021 compared to the end of 2020. Organic growth for the quarter was 24.4% or $682 million, which represents a significant increase compared to Q2 of 2020 which reflected the onset of the pandemic when revenue declined by 23% or $855 million. In addition to our organic revenue growth of 24.4% for the quarter, the impact of foreign exchange rates increased our revenue by 5.4% in the quarter, higher than we anticipated entering the quarter as the dollar continued to weaken against most of our larger currencies compared to the prior year. As a result, our reported revenue in the second quarter increased 27.5% to $3.57 billion from the $2.8 billion we reported for Q2 of 2020. Our operating margin for the quarter was 15.9%, up significantly from Q2 2020 even after excluding the gain on the sale of ICON in the current period and adding back the repositioning charge recorded in Q2 of 2020. As a result, our diluted earnings per share for the second quarter was $1.60 versus the loss of $0.11 per share we reported in Q2 of 2020. Our organic growth of $682 million or 24.4% in the second quarter reflects strong performance across all of our major geographic markets and across all of our service disciplines.

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For the third quarter 2021, PMT reported a net loss attributable to common shareholders of $43.9 million or $0.45 per common share, driven by fair value decline in PMT's interest rate sensitive strategies. PMT paid a common dividend of $0.47 per share. Book value per share decreased to $19.79 from $20.77 at the end of the prior quarter. We also successfully completed the issuance of $250 million in preferred shares in a public equity offering. Our high-quality loan production continues to organically generate assets for PMT, and this quarter, $28.6 billion in UPB of conventional correspondent production led to the creation of more than $425 million in new, low-coupon mortgage servicing rights. During the quarter, we purchased subordinate securities from two securitizations of investor loans totaling $548 million in UPB from PMT's correspondent production, and after the quarter, we retained mortgage securities from PMT's inaugural securitization of investor loans totaling $414 million in UPB. In aggregate, at the end of October, the fair value of PMT's investments in investor loans was approximately $60 million. For more than 12 years, PMT has successfully navigated various regulatory, interest rate, and origination market environments while delivering strong returns. Current forecasts for 2022 originations remain strong at $3 trillion. It is worth noting that purchase originations are expected to grow to a record $2 trillion in 2022, up 9% from this year's levels, while refinance originations are expected to decline to $1.1 trillion. Next, FHFA suspended the GSE's previously imposed 7% limit on the acquisition of investment properties and second homes, resulting in greater liquidity and competition for these loans. FHFA also suspended the $1.5 billion annual cash window limit for each of the GSEs, increasing competition for loans among correspondent aggregators like PMT. So while correspondents have more flexibility to deliver loans to the GSEs, we expect PMT to remain an attractive option to correspondent sellers looking to sell whole loans servicing-released, particularly as the competitive environment drives tighter origination margins. In total, we expect the quarterly run rate return for PMT strategies to average $0.42 per share or an 8.3% annualized return on equity. It is also important to note, our forecast for PMT's taxable income continues to support the common dividend at its current level of $0.47 per share. Total correspondent acquisition volume in the quarter was $44 billion, down 6% from the prior quarter and down 1% from the third quarter of 2020. 65% of PMT's acquisition volumes were conventional loans, similar to the prior quarter. PMT ended the quarter with 755 correspondent seller relationships. Conventional lock volume in the quarter was $29.4 billion, down 3% from the prior quarter and down 14% year over year. Importantly, purchase volume was a record for PMT at nearly $29 billion, up from $27.4 billion in the prior quarter and $21.5 billion in the third quarter of 2020. PMT's correspondent production segment pre-tax income as a percentage of interest rate lock commitments was 9 basis points, up from 6 basis points in the prior quarter. The weighted average fulfillment fee rate in the third quarter was 15 basis points, down from 18 basis points in the prior quarter, reflecting discretionary reductions made to facilitate successful loan acquisitions by PMT. Acquisition volumes in October were $12.9 billion in UPB, and locks were $11.5 billion in UPB. The fair value of PMT's MSR asset at the end of the third quarter was $2.8 billion, up from $2.6 billion at the end of the prior quarter. The total UPB of loans underlying our CRT investments as of September 30 was $35.4 billion, down 14% quarter over quarter. Fair value of our CRT investments at the end of the quarter was $1.9 billion, down from $2.2 billion at June 30, due to the decline in asset value that resulted from prepayments. PFSI uses a variety of loss-mitigation strategies to assist delinquent borrowers, and because the scheduled loss transactions, notably PMTT1-3 and L Street Securities 2017-PM1, trigger a loss if a borrower becomes 180 days or more delinquent. With respect to PMTT1-3, which comprises 6% of the fair value of PMT's overall CRT investment, if all presently delinquent loans proceeded unmitigated to 180 days or more delinquent, additional losses would be approximately $18 million. Through the end of the quarter, losses to date totaled $11 million. Moving on to L Street Securities 2017-PM1, which comprises 19% of the total fair value of PMT's CRT investment, such losses will become reversed credit events if the payment status is reported as current after a forbearance period due to COVID-19. PMT recorded $17 million in net losses reversed in the third quarter as $24 million of losses reversed more than offset the $7 million in additional realized losses. We estimate that an additional $20 million of these losses were eligible for reversal as of September 30, subject to review by Fannie Mae, and we expect this amount to continue to increase as additional borrowers exit forbearance and reperform. We estimate only $9 million of the $65 million in losses to date had no potential for reversal. This market expectation of significant future loss reversals resulted in the fair value of L Street Securities 2017-PM1 exceeding its face amount by $29 million at the end of the quarter. During the quarter, we added $27 million in fair value of new investor loan securitization investments, and after the quarter, we added another $21 million in fair value from PMT's inaugural securitization of investor loans. And on Slide 8, you can see $925 million of net new investments in long-term mortgage assets more than offset $836 million in runoff from prepayments on CRT assets. PMT reports results through four segments: credit-sensitive strategies, which contributed $60.7 million in pre-tax income; interest rate-sensitive strategies, which contributed $116.8 million in pre-tax loss; correspondent production, which contributed $27.8 million in pre-tax income; and the corporate segment, which had a pre-tax loss of $12.3 million. The contribution from PMT's CRT investments totaled $60 million. This amount included $26.4 million in market-driven value gains, reflecting the impact of credit spread tightening and elevated prepayment speeds. Net gain on CRT investments also included $33.1 million in realized gains and carry; $14.3 million in net losses reversed, primarily related to L Street Securities 2017-PM1, which Vandy discussed earlier; $100,000 in interest income on cash deposits; $13.2 million on financing expenses; and $800,000 of expenses to assist certain borrowers in mitigating loan delinquencies they incurred as a result of dislocations arising from the COVID-19 pandemic. PMT's interest rate-sensitive strategies contributed a loss of $116.8 million in the quarter. MSR fair value decreased a total of $63 million during the quarter and included $64 million in fair value increases due to changes in interest rates, $56 million of valuation decreases due to FHFA's elimination of the adverse market refinance fee, and $70 million in additional valuation declines primarily due to elevated levels of prepayment activity and increases to short-term prepayment projections. The fair value on agency MBS and interest rate hedges also declined by $95 million and included $80 million of fair value declines due to increases in market interest rates and declines due to hedge costs of $15 million. PMT's correspondent production segment contributed $27.8 million to pre-tax income for the quarter. The segment's contribution for the quarter was a pre-tax loss of $12.3 million. Finally, we recognized a tax benefit of $4.7 million in the third quarter, driven by fair value declines in MSRs held in PMT's taxable subsidiary.

For the third quarter 2021, PMT reported a net loss attributable to common shareholders of $43.9 million or $0.45 per common share, driven by fair value decline in PMT's interest rate sensitive strategies.

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Paul has been with D.R Horton since 1999, serving as our regional Florida as our Florida South Division President for 15 years and most recently as our Florida region President for seven years. The D.R Horton team finished the year with a strong fourth quarter, which included a 63% increase in consolidated pre-tax income to $1.7 billion and a 27% increase in revenue to $8.1 billion. Our pre-tax profit margin for the quarter improved 480 basis points to 21.3% and our earnings per diluted share increased 65% to $3.70. For the year, consolidated pre-tax income increased 80% to $5.4 billion on a $27.8 billion of revenue. Our pre-tax profit margin for the year improved 460 basis points to 19.3% and our earnings per diluted share increased 78% to $11.41. We closed a record 81,965 homes this year, an increase of over 16,500 homes or 25% from last year. While also achieving a historical low homebuilding SG&A percentage of 7.3%, our homebuilding return on inventory was 37.9% and our return on equity was 31.6%. Our homebuilding cash flow from operations for 2021 was $1.2 billion. Over the past five years, we have generated $5.9 billion of cash flow from homebuilding operations, while growing our consolidated revenues by 128% and our earnings per share by 383%. During this time, we also more than doubled our book value per share, reduced our homebuilding leverage 220% and increased our homebuilding liquidity by $2.8 billion, all while significantly increasing our returns on inventory and equity. After starting construction on 22,400 homes, our homes and inventory increased 26% from a year ago to 47,800 homes at September 30, 2021. In October, we started more than 8,000 homes, further positioning us to achieve double-digit growth and again in 2022. Diluted earnings per share for the fourth quarter of fiscal 2021 increased 65% to $3.70 per share, and for the year diluted earnings per share increased 78% to $11.41. Net income for the quarter increased 62% to $1.3 billion and for the year, net income increased 76% to $4.2 billion. Our fourth quarter home sales revenues increased 24% to $7.6 billion on 21,937 homes closed, up from $6.1 billion on 20,248 homes closed in the prior year. Our average closing price for the quarter was $346,100, up 14% from last year and the average size of our homes closed was down 1%. Net sales orders in the fourth quarter decreased 33% to 15,949 homes and the value of those orders was $6 billion, down 17% from $7.3 billion in the prior year. A year ago, our fourth quarter net sales orders were up 81% due to the surge in housing demand during the first year of the pandemic when we had significantly more completed homes available to sell and prior to the supply chain challenges that arose in 2021. Our average number of active selling communities decreased 5% from the prior year and was down 3% sequentially. Our average sales price on net sales orders in the fourth quarter was $378,300, up 23% from the prior year. The cancellation rate for the fourth quarter was 19% flat with the prior year quarter. As a result, we expect our first quarter net sales orders to be approximately equal to or slightly higher than our 20,418 sales orders in the first quarter last year. Our October net sales order volume was in line with our plans and we remain confident that we are well positioned to deliver double-digit volume growth in fiscal 2022 with 26,200 homes in backlog, 47,000 homes in inventory, a robust lot supply and strong trade and supplier relationships. Our gross profit margin on home sales revenue in the fourth quarter was 26.9%, up 100 basis points sequentially from the June quarter. On a per square foot basis, our revenues were up 7% sequentially, while our stick and brick cost per square foot increased 7.5% and our lot cost increased 2%. In the fourth quarter, homebuilding SG&A expense as a percentage of revenues was 6.9%, down 70 basis points from 7.6% in the prior year quarter. For the year, homebuilding SG&A expense was 7.3%, down 80 basis points from 8.1% in 2020. We started 22, 400, hundred homes during the fourth quarter and 91,500 homes during fiscal 2021, which is an increase of 21% compared to fiscal 2020. We ended the year with 47,800 homes in inventory, up 26% from a year ago. 21,700, hundred of our total homes et September 30th were unsold, of which 900 were completed. At September 30th, our homebuilding lot position consisted of approximately 530,000 lots, of which 24% were owned and 76% were controlled through purchase contracts. 24% of our total owned lots are finished and at least 47% of our controlled lots are or will be finished when we purchase them. Our fourth quarter homebuilding investments in lots, land and development totaled $1.8 billion, of which $1 billion was for finished lots, $330 million was for land, and $440 million was for land development. Forestar, our majority owned subsidiary is a publicly traded, well capitalized residential lot manufacturer operating in 56 markets across 23 states. Forestar continues to execute extremely well on its high growth plan as they increase their lot sold by 53% to 15,915 lakhs during fiscal 2021 compared to the prior year. Forestar's pre-tax profit margin for the year improved 400 basis points to 12.4%, excluding an $18.1 million loss on extinguishment of debt. At September 30th, Forestar's owned and controlled lot position increased 60% from a year ago to 97,000 lots. 61% of Forestar's owned lots are under contract with D.R Horton or subject to a right of first offer under our master supply agreement. $370 million of D.R Horton's land and lot purchases in the fourth quarter were from Forestar. Forestar is separately capitalized from D.R Horton and had approximately $500 million of liquidity at year-end with a net debt to capital ratio of 35.2%. Financial services pre-tax income in the fourth quarter was $103 million on $223 million of revenue with a pre-tax profit margin of 46.1%. For the year, financial services pre-tax income was $365 million on $824 million of revenue, representing a 44.3% pre-tax profit margin. For the quarter, 98% of our mortgage company's loan originations related to homes closed by our homebuilding operations and our mortgage company handled the financing for 66% of our homebuyers. FHA and VA loans accounted for 45% of the mortgage company's volume. Mortgage this quarter had an average FICO score of 722 and an average loan to value ratio of 89%. First-time homebuyers represented 59% of the closings handled by our mortgage company this quarter. Our multifamily and single-family rental operations generated combined pre-tax income of $742 -- $74.3 [Phonetic] million in the fourth quarter and $86.5 million in fiscal 2021. our total rental property inventory at September 30th was $841 million compared to $316 million a year ago. We sold three multifamily properties totaling 960 units during fiscal 2021 for $191.9 million, all of which were sold in the fourth quarter compared to two properties totaling 540 units sold in fiscal 2020. We sold three single family rental communities totaling 260 homes during fiscal 2021 for $75.9 million, including one sale of 64 homes during the fourth quarter for $21 million in revenue. In fiscal 2022, we expect our rental operations to generate more than $700 million in revenues from rental property sales. We also expect to grow the total inventory investment in our rental platforms by more than $1 billion in fiscal 2022 based on our current rental projects in development and our significant pipeline of future single and multifamily rental projects. During fiscal 2021, our cash provided by homebuilding operations was $1.2 billion and our cumulative cash generated from homebuilding operations for the past five years was $5.9 billion. At September 30th, we had $5 billion of homebuilding liquidity consisting of $3 billion of unrestricted homebuilding cash and $2 billion of available capacity on our homebuilding revolving credit facility. Our homebuilding leverage was 17.8% at fiscal year-end with $3.1 billion of homebuilding public notes outstanding, of which $350 million matures in the next 12 months. At September 30th, our stockholders' equity was $14.9 billion and book value per share was $41.81, up 29% from a year ago. For the year, our return on equity was 31.6%, an improvement of 950 basis points from 22.1% a year ago. During the quarter, we paid cash dividends of $71.6 million for a total of $289.3 million of dividends paid during the year. During the quarter, we repurchased 2.3 million shares of common stock for $212.6 million dollars and our stock repurchases during fiscal year 2021 totaled 10.4 million shares for $874 million. Our outstanding share count is down 2% from a year ago and our remaining share repurchase authorization at September 30th was $546.2 million. Based on our financial position and outlook for fiscal 2022, our Board of Directors increased our quarterly cash dividend by 13% to $22.5 per share. We expect to generate consolidated revenues in our December quarter of $6.5 billion to $6.8 billion and our homes closed by our homebuilding operations to be in a range between 17,500 homes and 18,500 homes. We expect our home sales gross margin in the first quarter to be 26.8% to 27% and homebuilding SG&A as a percentage of revenues in the first quarter to be approximately 8%. We anticipate our financial services pre-tax profit margin in the range of 30% to 35% and we expect our income tax rate to be approximately 24% in the first quarter. Looking further out, we currently expect to generate consolidated revenues for the full fiscal year of 2022 of $32.5 billion to $33.5 billion and to close between 90,000 homes and 92,000 homes. We forecast an income tax rate for fiscal 2022 of approximately 24%, subject to changes and potential future legislation that could increase the federal corporate tax rate. We also expect that our share repurchases will reduce our outstanding share count by approximately 2% at the end of fiscal 2022 compared to the end of fiscal 2021. We closed the most homes in a year in our company's history, achieving 10% market share with record profits and returns and we are incredibly well positioned to continue growing and improving our operations in 2022.

The D.R Horton team finished the year with a strong fourth quarter, which included a 63% increase in consolidated pre-tax income to $1.7 billion and a 27% increase in revenue to $8.1 billion. Our pre-tax profit margin for the quarter improved 480 basis points to 21.3% and our earnings per diluted share increased 65% to $3.70. Diluted earnings per share for the fourth quarter of fiscal 2021 increased 65% to $3.70 per share, and for the year diluted earnings per share increased 78% to $11.41. Our fourth quarter home sales revenues increased 24% to $7.6 billion on 21,937 homes closed, up from $6.1 billion on 20,248 homes closed in the prior year. Net sales orders in the fourth quarter decreased 33% to 15,949 homes and the value of those orders was $6 billion, down 17% from $7.3 billion in the prior year. Looking further out, we currently expect to generate consolidated revenues for the full fiscal year of 2022 of $32.5 billion to $33.5 billion and to close between 90,000 homes and 92,000 homes.

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10-year treasuries backed up 83 basis points to 1.74 at the end of Q1, which by the way, is where they were in late January of 2020, and the curve steepened with two 10s widening by about 80 basis points to 158 basis points at March 31. Short rates remain firmly anchored at very low levels, with twos only 4 basis points wider during the quarter. Interestingly, although 10-year rates at 170 are back to levels seen in late 2019 and early 2020, two-year rates in the low to mid-teens have barely changed in the last year. But twos were at 160 back in late 2019. Please turn to Page 4. We reported GAAP earnings of $0.17 per share in the first quarter. GAAP book value was $4.63, up 2% from December 31s, and economic book value was $5.09, up 3.5% from December 31st. GAAP economic return for the quarter was 3.6%, but economic book value economic return was up 5% for the quarter. We repurchased 10.8 million common shares at an average purchase price of $4.14 or 80% of economic book value from March 1st through April 30th. Our leverage declined slightly over the quarter to 1.6:1, and we paid a $0.075 dividend to shareholders on April 30. Please turn to Page 5. Our efforts to lower interest expenses through securitizations had visible impact on our first-quarter earnings as interest expense declined by 27% from the fourth quarter of 2020. Net interest income for the first quarter increased by $4 million versus the previous quarter and by $13 million versus Q3 of 2020 after adjusting for a large interest income contribution of $8 million from the payoff of a single non-agency bond with a very low amortized cost during the first quarter. Please turn to Page 6. Again, continuing the theme of aggressively taking advantage of available market opportunities, we have executed three additional securitizations on nearly $1 billion of UPB at attractive levels. As you can see on this page, AAA yields on bonds sold on the INB-1 deal was 83 basis points and 112 basis points on the non-QM One deal with the blended cost of debt for both deals in the low 1s. The NPL deal that closed in March replaces securitizations sold in 2018 at a blended cost of debt that's over 150 basis points cheaper than that -- they replaced. Please turn to Page 7. Home price increases in the last year are the largest, in some cases, in 20 years, and housing supply is at extremely low levels. We liquidated 177 OREO properties in the first quarter, generating $50 million in proceeds and $2.2 million in gains. Please turn to Page 8. Under our share repurchase program, we instituted a 10b5-1 plan in March that permits share repurchases at any time. Previous to instituting a 10b5-1 plan, we were permitted to purchase shares only during open window periods. And again, from early March through April 30th, we repurchased 10.8 million shares at an average price of $4.14. Please turn to Page 9. We did purchase $253 million of loans in the first quarter. On the financing side, you can see that 68% of our asset-based financing is non mark-to-market with the Non-QM securitization that we closed in April, it's now over 70%. Please turn to Page 10. We expect that this transaction will be accretive to MFA's earnings by $0.08 to $0.12 per year. MFA currently owns a 43% equity stake in Lima One, and we have purchased over $1 billion of business purpose loans from Lima One since 2017. This acquisition includes the Lima One operating platform as well as their $1 billion servicing book. Net income to common shareholders was $77.3 million or $0.17 per share. The key items impacting our results are as follows: net interest income of $31.8 million was $12.4 million higher sequentially. This included approximately $8 million of accretion on a non-agency bond that we hold a significant discount par that was redeemed during the quarter. As Craig noted, interest expense this quarter fell 27% sequentially and our overall cost of funds fell to 2.92% from 3.63% in Q4 2020. We reduced our overall CECL allowance on our carrying value loans to $63.2 million, reflecting lower estimates of future unemployment and higher home price appreciation in our credit loss modeling as well as lower loan balances. This reversal and other net adjustments to our CECL reserves positively impacted net income for the quarter by $22.8 million. After the initial significant increase in CECL reserves taken in Q1 2020, when uncertainty related to COVID-19 economic impacts were at their highest, we have reduced our CECL reserves by more than $80 million in the subsequent four quarters. Actual charge-off experience continues to remain very modest, with approximately $1.2 million of net charge-offs taken in the first quarter. Net gains of $49.8 million were recorded. And its components, which include $32.1 million of market value increases and $17.7 million of interest payments, liquidation gains and other cash income were also essentially unchanged quarter over quarter. Finally, our operating and other expenses were $22.5 million for the quarter. Turning to Page 12. The Zillow median home value was up 10.6% in March from a year ago. The unemployment rate continues to recover from a peak of almost 15% down to 6% as the economy reopens. Turning to Page 13. We purchased over $200 million over the first quarter, which is more than double our acquisitions from the prior quarter. The three-month average CPR for the portfolio remains around 30%. We executed on an additional securitization at the beginning of April, bringing a total amount of collateral securitized to approximately $1.75 billion. Securitization, combined with non mark-to-market term facility has resulted in over 80% of our non-QM portfolio financed with non mark-to-market leverage. Turning to Page 14. Through our servicers, we granted almost 32% of the portfolio of temporary payment relief, which we believe helped put our borrowers in a better position for long-term payment performance. Over the first quarter, we saw a stable 60-plus delinquency rate as compared to the fourth quarter of 7.9%. In addition, over 25% of those delinquent loans made a payment in March. Many delinquent borrowers are in repayment plans, which will cause them to cure their delinquency status over the next six to 12 months. Turning to Page 15. Our RPL portfolio of $1 billion has been impacted by the pandemic but continues to perform well. 80% of our portfolio remains less than 60 days delinquent. And although the percentage of the portfolio is 60 days delinquent and status is 20%, a quarter of those borrowers continue to make payments. Prepaid fees in the first quarter continued to rise to a one-month CPR of 20 as mortgage rates continue to be historically low and more borrowers gain equity with the increase in home prices. And while 30% of our RPL borrowers were impacted by COVID, we have worked with our servicers to provide assistance to borrowers and have seen improvement in delinquency levels over the quarter. Turning to Page 16. 37% of loans that were delinquent at purchase are now either performing or paid in full. 46% are either liquidated or REO to be liquidated. Our REO sale -- our REO properties have continued at an accelerated pace at advantageous prices, selling 52% more properties over the last 12 months as compared to the year prior, and 17% are still on nonperforming status. Turning to Page 17. Lima One is a leading nation and originator of business purpose loans with a strong brand recognition in the BPL borrower community with over 50% of loan origination coming from repeat borrowers. Lima has originated over $3 billion since inception and has shown that they can reliably originate over $1 billion annually. We believe that by combining MFA's firm capital and capital markets expertise with Lima's capabilities, we can create a differentiated platform capable of providing best-in-class financing options to investors with a clear path to grow well beyond $1 billion in annual volume. The strong housing market with home prices rising more than 10% annually has allowed many of our borrowers to successfully complete their projects and sell quickly into a strong market. This combined with the seasoned nature of our portfolio, currently at a weighted average loan rates of 20 months, led to us receiving $144 million of principal payments in the quarter. MFA's fix and flip portfolio declined $117 million to $464 million UPB at the end of the first quarter. Principal paydowns were $144 million, which is equivalent to a quarterly pay down rate of 69 CPR on an annualized basis. We advanced about $12 million of rehab draws and converted $5 million to REO. We purchased $20 million UPB of fix and flip loans in the first quarter. Purchase activity has picked up in the second quarter as we have committed to acquire over $30 million so far in the second quarter and expect purchase volume to pick up meaningfully with the acquisition of Lima One. The average yield on the portfolio was 4.93%, and all of our fix and flip financing is non mark-to-market debt with the remaining term of 15 months. 60-plus day delinquency declined $13 million to $149 million at the end of the first quarter. Fix and flip loan loss reserves continued to trend down in the first quarter, declining by $4.7 million, primarily due to improved economic expectations and the strong housing market. Turning to Page 18. Seriously delinquent fix and flip loans decreased $13 million in the quarter to $149 million at the end of the first quarter. In the quarter, we saw $18 million of loans payoff in full, $5 million cured to current or 30-day delinquent pay status, $5 million converted to REO while $15 million became new 60-plus delinquent. In addition, approximately 13% of the seriously delinquent loans are already listed for sale, potentially shortening with time until resolution. Since inception, we've collected approximately $3.7 million in these types of fees across our fix and flip portfolio. The housing market continues to be extremely strong with record low mortgage rates and low levels of inventories supporting annual home price appreciation in excess of 10%. Turning to Page 19. Due to strong prepayment section and solid credit profile, the portfolio yield has remained steady in the mid-5% range post COVID and was 5.61% in the first quarter. And including those, the single-family rental portfolio yield was 6.33% in the first quarter. After temporarily increasing the fourth-quarter prepayments trended back down to the historical low mid teens range with the first quarter three-month prepayment rate at 12 CPR. 60-plus day delinquencies were relatively unchanged in the quarter in the mid- to high 5% area. We acquired $20 million of rental loans in the first quarter. Second quarter is off to a strong start with us committing to purchase over $35 million so far in the second quarter. Approximately $218 million for loans were securitized. We sold approximately 91% of the bonds at a weighted average coupon of 106 basis points. This transaction lowered the funding rate of the underlying assets by over 150 basis points and increased the percentage of SFR financing that's non mark-to-market to 75% at the end of the first quarter. We have repurchased nearly 25 million shares of our common stock at levels that are accretive to book value and earnings.

We reported GAAP earnings of $0.17 per share in the first quarter. GAAP book value was $4.63, up 2% from December 31s, and economic book value was $5.09, up 3.5% from December 31st. Net income to common shareholders was $77.3 million or $0.17 per share. The key items impacting our results are as follows: net interest income of $31.8 million was $12.4 million higher sequentially.

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At the Electronics segment, approximately two-thirds of the 63% year-on-year revenue increase in the fourth quarter reflected organic growth with continued broad-based geographical recovery, including increased demand for relays in solar and electric vehicle applications. At the Engraving segment, revenue increased approximately 16% year-on-year, reflecting a favorable geographic mix, project timing and increased soft trim product demand. Total Company backlog realizable in under one year increased 19% sequentially in fourth quarter fiscal 2021, with strength in Electronics, Specialty Solutions and Engineering Technologies. On a consolidated basis, we reported an adjusted operating margin of 12% in fiscal 2021, representing a 90 basis point increase year-on-year, with our fourth quarter margin of 13.3%, the highest quarterly margin Standex has ever reported. In the first quarter of fiscal 2022, we expect a slight decrease in revenue, but a similar operating margin compared to fourth quarter fiscal 2021. Revenue increased $28 million or 62.7% year-on-year, reflecting a 42.2% organic growth rate or an approximate $19 million increase. The Renco acquisition contributed approximately $7.3 million in revenue and continues to be a highly complementary fit with our magnetics portfolio. Our Electronics operating margin increased to 21.6% compared to 13.1% in the year ago quarter, reflecting operating leverage associated with revenue growth and productivity initiatives, partially offset by increased raw material cost. In particular, NBOs contributed in excess of $15 million in fiscal 2021 compared to our prior estimate of $12 million on our third quarter earnings call. Our pipeline remains healthy, with total segment backlog realizable under a year increasing approximately $22 million or 23% sequentially in the fourth quarter as we continue to see strong growth in reed switch-based products in magnetics applications. Revenue increased approximately $5 million or 15.9% year-on-year with operating income growth of approximately $3.1 million or 119% year-on-year, reflecting a favorable geographic mix, timing of projects and increased soft trim product demand. Operating margin increased to 15.4% compared to 8.1% in the year ago quarter, reflecting the volume growth, combined with segment productivity and our cost initiatives. Laneway sales at Engraving were approximately $14.8 million, representing a 9% increase sequentially and greater than 50% increase year-on-year, including growth in software tools, laser engraving and tool finishing. Revenue increased approximately $8 million or 62.7% year-on-year, reflecting positive trends in pharmacy chains, clinical laboratories and academic institutions, primarily attributable to demand for COVID-19 vaccine storage. Operating income increased 48.7% year-on-year, reflecting the volume increase, balanced with investments to support future growth opportunities and higher freight costs. Revenue decreased $5.7 million or 21.8% and operating income was $1.1 million lower, representing a 25.6% decrease year-on-year. On a sequential basis, operating margin increased to 15.1% compared to 6.2% in third quarter, reflecting a continued broad-based sequential end market recovery and favorable mix, complemented by ongoing productivity initiatives. Specialty Solutions' revenue increased approximately $1.7 million or 7.1% as its end markets, particularly in foodservice and specialty retail, continued to recover. Operating income decreased approximately $700,000 or 18.7%. We believe this product is approximately 20% more energy efficient than current gear pump technology with a longer service life. From a revenue perspective, four of our five segments reported year-on-year growth, led by the Electronics and Scientific segments with total organic growth over 20% as compared to fiscal fourth quarter 2020. In addition, from a margin standpoint, adjusted operating margin of 13.3% is the highest quarterly margin that Standex has ever reported, reflecting successful leverage on our volume growth, continued buildout our price and productivity actions, as well as the impact of the strategic portfolio actions David highlighted in his comments. In the fourth quarter, we reported free cash flow of approximately $26 million or 36% year-on-year increase. In addition, we generated a free cash flow to GAAP net income conversion rate well in excess of 100% in fiscal 2021. On a consolidated basis, total revenue increased 26.6% year-on-year from $139.4 million to $176.4 million. Organic growth was 20.5% while Renco contributed approximately 5.2% and FX contributed 3.5% increase to the revenue growth. On a year-on-year basis, our adjusted operating margin increased 460 basis points to 13.3%, reflecting operating leverage associated with revenue growth, readout of price and productivity actions and profit contribution from Renco, partially offset by the impact of work stoppages in the Specialty Solutions segment. In addition, our tax rate was 20.7% in the fourth quarter of 2021 compared to 26.7% in the fourth quarter of fiscal 2020. We expect a tax rate in the 24% range in fiscal 2022 with a slightly higher tax rate in the first quarter. Adjusted earnings per share were $1.40 in the fourth quarter of 2021 compared to $0.65 a year ago. We generated free cash flow of $26.4 million in fiscal fourth quarter of '21 compared to free cash flow of $19.5 million a year ago. In fiscal 2021, we achieved 118% free cash flow to GAAP net income conversion, inclusive of approximately $8.1 million in pension payments made during the year. Standex had net debt of $63.1 million at the end of June compared to $82.1 million at the end of March, reflecting free cash flow of approximately $26.4 million, partially offset by $5 million of stock repurchases, along with dividends and changes in foreign exchange. Net debt for the fourth quarter of 2021 consisted primarily of long-term debt of $199.5 million, and cash and cash equivalents were $136.4 million with approximately $92 million held by foreign subs. Standex's net debt to adjusted EBITDA leverage ratio was approximately 0.57 at the end of the fourth quarter, with a net debt to total capital ratio of 11.1%. The Company's interest coverage ratio increased sequentially from 11.4 times to 13.1 times at the end of the fourth quarter. We had approximately $245 million of available liquidity at the end of the fourth quarter and continue to repatriate cash with $6.8 million repatriated during the quarter. In total, we repatriated approximately $38 million in cash in fiscal 2021, slightly ahead of our initial expectations. From a capital allocation perspective, we repurchased approximately 50,000 shares for $5 million in the fourth quarter. In fiscal 2021, we repurchased a total of 267,000 shares at an average price of approximately $79 per share. There is approximately $22 million remaining on our current repurchase authorization. We also declared our 228th consecutive quarterly cash dividend on July 22 of $0.24 per share. Finally, we expect capital expenditures between $25 million and $30 million in fiscal 2022 compared to $21.5 million in fiscal 2020.

In the first quarter of fiscal 2022, we expect a slight decrease in revenue, but a similar operating margin compared to fourth quarter fiscal 2021. On a consolidated basis, total revenue increased 26.6% year-on-year from $139.4 million to $176.4 million. Adjusted earnings per share were $1.40 in the fourth quarter of 2021 compared to $0.65 a year ago.

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Company revenue was up 32% to new record of $1.24 billion. At constant currency revenue was up 30%. GAAP operating income was up 59% to a record $216 million. GAAP earnings per share from continuing operations, up 72% to a record $4.51. Total segment profit rose 45% to a record $222 million. Total segment margin expanded 160 basis points of 17.9%. And adjusted earnings per share from continuing operations rose 54% to a record $4.57. Residential revenue was up 30% as reported and up 29% at constant currency. Segment profit rose 49% and segment margin expanded 290 basis points to 22.6%. Residential had comparable revenue growth in both replacement and new construction of approximately 30%. Lennox Brand revenue was up 30% as was our Allied and other brands combined. As we previously mentioned, the fourth quarter of 2021 will have a headwind of 6% from fewer days in the prior year quarter, but market demand remains high entering the second half. Adjusted for weather, air conditioners ramped 30% more during the summer season last year. This summer, we may not be getting our run time impact of 30%, but there's still lot of people working from home and many will continue to work from home full time or like here at Lennox on a flexible schedule a couple days a week. If the run time impact is 20%, that will reduce the medium life of an air conditioner from 15 years to around 12 years. Our original analysis of air conditioner lifespan the years 2005 through 2015. Since then, for the years 2016 through 2020, weather as measured by average cooling degree days has been 5% hotter in the United States. Second quarter revenue was up 34% as reported and 33% at constant currency. Segment profit rose 27%. Segment margin was 17.9%, down 100 basis points on the timing of expenses and factory inefficiencies. At constant currency commercial equipment revenue was up more than 30% in the quarter. Within this, replacement revenue was up more than 40% with planned replacement up 50% and emergency replacement up more than 20%. Breaking out another way, regional and local business revenue was up more than 20%. National Account equipment revenue was up more than 50% as market continues to rebound and benefit from the pent-up demand created last year. On the service side, Lennox National Accounts Services revenue was up more than 30%. VRF revenue was up more than 25%. In Refrigeration, for the second quarter, revenue was up 37% as reported and 32% at constant currency. North America revenues up more than 30%. Europe Refrigeration revenue was up more than 30% at constant currency. And Europe HVAC revenue was up more than 25% at constant currency. Refrigeration segment margins expanded 90 basis points to 9.1% and segment profit rose 52%. We now expect the revenue growth of 12% to 16% on a reported basis or 11% to 15% at constant currency. We raised guidance for adjusted earnings per share from continuing operations to $12.10 to $12.70 for the year. We are raising free cash flow guidance to $400 million for the year and stock repurchase guidance to total $600 million for the year. We're capturing a higher yield from our first two price increases this year, and now expect $110 million of price benefit from those. In addition, we just announced the third price increase of up to 8% from most of our businesses that is effective September 1. This will yield even more price benefit than the $110 million of guidance provided today. Lastly, as I'm sure most of you saw, the company announced on July 14 that after 15 years I plan to step down as Chairman and CEO of Lennox International by mid-2022. In the second quarter, revenue from Residential Heating & Cooling was a record $838 million, up 30%. Volume was up 27%, price was up 3% and mix was down 1%. Foreign exchange had a positive 1% impact on revenue. Residential segment profit was a record $190 million, up 49%. Segment margin expanded 290 basis points to a record 22.6%. In the second quarter, Commercial revenue was $253 million, up 34%. Volume was up 29%, price was flat and mix was up 4%. Foreign exchange had a positive 1% impact to revenue. Commercial segment profit was $45 million, which was up 27%. Segment margin was 17.9%, down 100 basis points. In Refrigeration, revenue was $148 million, up 37%. Volume was up 30%, price was up 2% and mix was flat. Foreign exchange had a positive 5% impact to revenue. Refrigeration segment profit was $14 million, up 52% and segment margin was 9.1%, which was up 90 basis points. Regarding special items in the second quarter, the company had net after-tax charges of $2 million that included a charge of $1 million for restructuring activities, a net charge of $3.4 million for various other items in total and a benefit of $2.4 million for excess tax benefits from share-based compensation and other tax items. Corporate expenses were $27 million in the second quarter compared to $19 million in the prior year quarter, primarily on higher incentive compensation. Overall, SG&A was $168 million compared to $130 million in the prior year quarter. SG&A was down as a percent of revenue to 13.5% from 13.8% in the prior year quarter. In the second quarter, cash from operations was $192 million, up from $105 million in the prior year quarter. Capital expenditures were $21 million in the second quarter compared to approximately $19 million in the prior year quarter. We generated $170 million -- $171 million of free cash flow in the second quarter, up from approximately $87 million in the prior year quarter. The company paid $29 million in dividends in the quarter and repurchased $200 million of stock. The total debt was $1.24 billion at the end of the second quarter, and we ended the quarter with a debt-to-EBITDA ratio of 1.7. Cash, cash equivalents and short-term investments were $47 million at the end of the second quarter. As previously announced, on July 14, we raised guidance for 2021 revenue growth from 7% to 11% to a new range of 11% to 15% at constant currency. We now expect a one point benefit from foreign exchange for revenue growth of 12% to 16% for the year at actual currency. We raised guidance for 2021 GAAP earnings per share from continuing operations from $11.33 to $11.93 to a new range of $11.97 to $12.57. And we raised guidance for 2021 adjusted earnings per share from continuing operations from $11.40 to $12 to a new range of $12.10 to $12.70. As we previously mentioned, the first quarter of 2021 had a 6% benefit for more days than in the prior year quarter. In the fourth quarter of 2021, we'll have a headwind of 6% from fewer days than the prior year quarter, as Todd mentioned. We now expect a benefit of $110 million from price for the year, up from our prior guidance of a $90 million benefit. The new $110 million price guidance reflects the additional yield we are capturing from our first two price increases this year. In addition, we have announced a third price increase for up to 8% that is effective September 1 for most of our businesses. This will yield a price benefit on top of $110 million we are currently guiding for full year price this year. Foreign Exchange is now expected to be a $10 million benefit, up from neutral or our previous assumption. And we now expect an effective tax rate of approximately 20% on an adjusted basis for the full year compared to the previous guidance of approximately 21%. Free cash flow is now targeted to be approximately $400 million for the full year, up from prior guidance of approximately $375 million on strong earnings performance in the first half and our current outlook. We are raising stock repurchase guidance for the year from $400 million, which we completed in the first half to $600 million. For the headwinds from prior guidance, commodities are now expected to be a headwind of $80 million, up from our prior guidance of $55 million. With inflation in components, we are reducing our net savings from sourcing and engineering-led cost reductions to a $5 million benefit, down from prior guidance to be a $15 million benefit. The higher material costs from inflationary pressures in 2021 are leading to a LIFO accounting adjustment of approximately $15 million this year. Factory productivity is now expected to be a $10 million benefit, down from a $20 million benefit in our prior guidance. And we are now planning for corporate expenses to be $100 million, up from $95 million in our prior guidance, primarily due to higher incentive compensation. We still expect residential mix to be a $10 million benefit. With 30 new Lennox stores planned for this year, our distribution investments are up from last year to a more traditional run rate level, freight is still expected to be a $5 million headwind and tariffs are expected to be a $5 million headwind. We are planning on SG&A to be approximately -- up approximately 7% for the year or headwind of approximately $45 million. We still expect net interest and pension expense to be approximately $35 million. We still expect capital expenditures to be approximately $135 million this year, about $30 million of which is for the third plant at our campus in Mexico. We expect construction to be completed by the end of 2021 and to have the plant fully operational by mid-2022, and we expect nearly $10 million in annual savings from the third plant. And finally, we still expect the weighted average diluted share count for the full year to be between 37 million to 38 million shares.

GAAP earnings per share from continuing operations, up 72% to a record $4.51. And adjusted earnings per share from continuing operations rose 54% to a record $4.57. We are raising free cash flow guidance to $400 million for the year and stock repurchase guidance to total $600 million for the year. The total debt was $1.24 billion at the end of the second quarter, and we ended the quarter with a debt-to-EBITDA ratio of 1.7. We are raising stock repurchase guidance for the year from $400 million, which we completed in the first half to $600 million.

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We reported adjusted earnings per share of $0.04 and adjusted EBITDA of $26 million. Energy prices further spiked to record levels in the fourth quarter, negatively impacting earnings by approximately $4 million versus our prior guidance, which had already reflected about $1.5 million of energy inflation. Fourth quarter adjusted earnings from continuing operations was $1.6 million, or $0.04 per share, a decrease of $0.18 versus the same period last year. Slide 4 shows a bridge of adjusted earnings per share of $0.22 from the fourth quarter of last year to this year's fourth quarter of $0.04. Composite fibers results lowered earnings by $0.15, driven primarily by significant inflationary pressures experienced in energy, raw materials, and logistics. Airlaid materials results increased earnings by $0.04, primarily due to strong volume recovery in the tabletop products category, as well as from the addition of Mount Holly results compared to the prior year. Spunlace results lowered earnings by $0.02, driven by inflationary headwinds experienced in energy and raw materials and unfavorable operations. Interest expense lowered earnings by $0.07, driven by the issuance of the new bond to finance the two acquisitions. Taxes and other items were $0.02 favorable due to a lower tax rate this quarter from a valuation allowance release of approximately $3 million. Total revenues for the quarter were 1.3% higher on a constant currency basis, mainly driven by higher selling prices of approximately $9 million. Shipments were down 11%, or nearly 3,900 metric tons with wall cover accounting for more than 75% of the decline. Prices of energy, wood pulp, and freight continued to escalate in the fourth quarter and negatively impacted results by $16.6 million versus the same quarter last year. Sequentially from Q3 of 2021, this impact was $5.4 million, primarily driven by rising energy prices in Europe, which escalated even further during the quarter despite the savings provided by our existing energy hedging program. Operations were slightly unfavorable by $200,000, and currency and related hedging activity unfavorably impacted results by $900,000. We expect lower volume and market-related downtime to have a cost penalty of approximately $2 million. Revenues were up 48% versus the same prior year period on a constant currency basis, supported by the addition of Mount Holly and strong recovery in the tabletop category. Shipments of tabletop almost doubled while wipes were 74% higher when compared to the fourth quarter of last year. Additionally, demand for home care and hygiene products were lower by 2% and 3%, respectively, reflecting changes in buying patterns at year end. Selling prices increased meaningfully from contractual cost pass-throughs, as well as from price increases, including the 10% price increase action implemented in the third quarter for customers without cost pass-through arrangements. While these actions together helped the segment to offset the higher raw material prices, they fell short of recovering the higher-than-anticipated energy price increases, unfavorably impacting results by a net $1.2 million. Operations were lower by $1.7 million compared to the prior year, mainly due to higher spending and inflationary pressures. And foreign exchange was unfavorable by $1.2 million, mainly driven by the lower euro rate. For the first quarter of 2022, we expect shipments to be 3% higher on a sequential basis with favorable mix, thereby improving operating profit by $1 million. Revenue for the segment was approximately $58 million in the quarter. Shipments for the quarter were approximately 12,500 metric tons, which were slightly below our expectation of 13,000 metric tons. The lower shipments, coupled with unfavorable mix, negatively impacted results by $700,000. The segment also experienced higher-than-anticipated raw material inflation, particularly on synthetic fibers, as well as higher energy costs at its European sites, lowering profits by approximately $1.5 million. The preliminary purchase price allocation resulted in depreciation and amortization of approximately $1.7 million after including the acquisition step-up to fixed and intangible assets. However, due to inflationary pressures, we expect a loss for the first full quarter at a similar run rate as the first two months of ownership, equaling approximately $2 million for the first full quarter. Our corporate costs for full year 2021 of $22.4 million were approximately $4.9 million lower than prior year and mostly in line with our guidance from last quarter. Costs related to strategic initiatives for the full year were $31 million, mainly pertaining to our two acquisitions and the associated financing. Interest and other income and expense for the full year was $15 million and in line with our previous guidance. For 2022, we expect corporate costs to be approximately $27 million higher than 2021, where we had lower overall spending due to COVID, but in line with 2020 costs. Our tax rate for the full year was 32% lower than our previous guidance of 38% to 40%. This was largely driven by the release of a valuation allowance of $3 million, reflecting a change in the recovery of deferred tax assets, primarily due to changes resulting from completing the recent Jacob Holm acquisition. We expect our Q1 2022 tax rate to be between 48% and 50% on adjusted earnings and full year interest and other financing costs to be approximately $35 million, reflecting the recent bond issuance. 2021 adjusted free cash flow was lower by approximately $10 million, driven mainly by lower cash earnings and capital expenditures. We expect capital expenditures for 2022, including Spunlace and Mount Holly, to be between $45 million and $50 million, $7 million to $8 million of which pertains to Spunlace Systems integration costs, which we previously announced as costs associated with generating our targeted synergies. Depreciation and amortization expense is projected to be approximately $74 million, reflecting a full year of ownership for Mount Holly and Jacob Holm. Our leverage ratio increased to 4.6 times as of December 31, 2021, versus year-end 2020 of 1.7 times, mainly driven by the Mount Holly acquisition for $175 million and the Jacob Holm acquisition for $302 million. We successfully executed our previously mentioned $500 million bond offering in October 2021, and we still have ample available liquidity of approximately $260 million. Our near-term focus will be to successfully integrate Jacob Holm, realize the $20 million of expected annual synergies and actively de-lever the balance sheet. Our objective is to move as many customers as possible to a dynamic pricing model with the goal of migrating approximately 50% of the revenue base to this new structure in '22.

We reported adjusted earnings per share of $0.04 and adjusted EBITDA of $26 million. Fourth quarter adjusted earnings from continuing operations was $1.6 million, or $0.04 per share, a decrease of $0.18 versus the same period last year. Slide 4 shows a bridge of adjusted earnings per share of $0.22 from the fourth quarter of last year to this year's fourth quarter of $0.04. Airlaid materials results increased earnings by $0.04, primarily due to strong volume recovery in the tabletop products category, as well as from the addition of Mount Holly results compared to the prior year.

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Our portfolio occupancy as of late June increased to approximately 33%, which represents a significant increase from where we were in April where it reported between 15% and 20% occupancy levels. The predominance of tenants returning to expanded beyond just small employers as occupancy for tenants 50,000 square feet and below is over 45%. First is a growing need for space planning services, which as we expected, is I think a good sign, 48 tenants representing about 1.2 million square feet have requested assistance for more internal space planning team and we have engaged with them. We also got a lot of feedback on an increased need for parking due to near-term public transportation concerns, which we certainly believe are short-term in duration, but about 103 of our tenants representing almost 3 million square feet expressed an interest in parking, and actually during the quarter we entered into 167 new monthly contracts and saw a 30% increase in our parking lot occupancies. We have reduced our forward rollover exposure to an average of 6% over the next three years, and as noted on page 2 of our SEC to 7.1% from 2022 to 2024. So, our forecast of rollover exposure is below 10% annually in each year through 2026. We do believe we have some key near-term earnings drivers of first, we have, as you all know some several key vacancies that upon lease-up over the next 8 quarters will generate between $0.07 and $0.10 of additional revenue per share, that is in both our wholly owned and joint venture inventory. We are also projecting that 405 Colorado and 3000 Market stabilize in 2022 as we bring those development projects online, and we're clear we're seeing trend lines of tenants requirements higher quality space, which we believe positions our portfolio extremely well, and that's really evidenced by what we're hearing, but also by a 23% increase in our development pipeline of Q2 over Q1. In looking at the numbers for the second quarter, we posted FFO of $0.32 per share, which was in line with consensus estimates. We made excellent progress on all of our 2021 business plan metrics, and during the quarter we had 20,000 square feet of positive absorption. Given the increase in leasing visibility through the balance of the year, we did increase our speculative revenue target mid point by $500,000 and reduce the range --narrow the range rather from $18 to $22 million to $22 to $21 million, and as reported we are now 98% complete at that revised range. Rent collections continued to be very strong, one of the best in the sector as we've collected over 99% of our second quarter rents. Tenant retention was 58%. Second quarter capital costs were 12.8% of generated revenues, slightly above our 10% to 12% business plan range, but average lease term was 8.5 years, which exceeded our 7-year business plan target. Cash mark-to-market was a positive 14%, and our GAAP mark-to-market was also positive 22%. Our second quarter GAAP same-store NOI was up 0.5% and year-to-date is below our 2021 range of 0% to 2%. Second quarter cash same-store NOI was 1.8%, again below our 2021 range of 3% to 5%. With the exception of our Met DC operation, all of our regions are expected to post positive same-store results, and our Met DC region will remain negative while 1676 International continues toward its lease up phase. We are still forecasting 21 year and debt-to-EBITDA in the range of 6.3 to 6.5 as we've always cautioned that it does depend on the timing of future development starts for the balance of the year. We added total of over 1500 virtual tours with almost 800,000 square feet being targeted. That lead to a 46% increase in physical tours over Q1. Our overall pipeline stands at a 1.4 million square feet with approximately 200,000 square feet in advanced stages of lease negotiations. Our overall pipeline increased by just short of 600,000 square feet during the quarter. On a comparable set of properties, the pipeline today is up 7% compared to the second quarter of 2019. Leases that we executed this quarter are also up 13% from the second quarter of 2019. Deals at the proposal stage are up 20% including new and expansion proposals being up 13% over that comparative period. Our deal conversion rates, it was down 6% to 28% in second quarter of 2021 versus 34% in the second quarter of 2019. As you might expect, given where we are in this recovery phase, the median deal cycle time is up 27 days to 104 days this past quarter versus 77 days in the second quarter of 2019. In looking at liquidity, we have maximized the liquidity and tends to having $460 million of line of credit availability by the end of the year. Our dividend is extremely well covered at 57% of FFO and 81% of CAD at the midpoint of our guidance. Our 5-year dividend growth rate has been 5.3% versus the peer average below 4% and we have grown our CAD during that same 5-year period close to an 8% annual rate versus the peer average again below 4%. Looking at development, as we always note, we have a number of production development projects that can be completed in 4 to 6 quarters that cost between $40 and $70 million. The pipeline on those four production assets grew 40% since the first quarter, which is a good sign, again I think of tenants entering the market, but also looking for high quality space. And along those lines we did, so as the renovation program for 250 King of Prussia Road that is 169,000 square foot project located in the Radnor Submarket that we acquired for approximately $120 dollars per square foot as part of an overall transaction with Penn Medicine. This project will be the first component of our Radnor Life Science Center, which will initially consist of this project, and our planned 155 Radnor ground up 150,000 square foot development, and these two projects will deliver more than 300,000 square feet of life science and office space to one of the region's best performing long term submarkets. The project will be built to a 7% blended yield and consists of 326 apartment units, a 100,000 square feet of life science space, 100,000 square feet of innovative office space and street level retail. We did close our 65% loan to cost construction loan at a floating rate equal to three quarters per cent. However, given the front loaded the equity commitment for both us and our partner, even with Brandywine $55 million equity commitment, of which 46.5 has already invested, the first funding of that construction loan won't occur until first quarter of 2022, but it does complete the capital stack for that project. Looking at our 405 Colorado project in Austin. During the quarter, our lease percentage did increase to 24% and we currently have a pipeline of 527,000 square feet including about 40,000 square feet in final lease negotiations. 3000 Market, is there a life science renovation within Schuylkill Yards. The construction will finish later this year and we're projecting the lease commencing in four quarter 2021 at a development yield of 9.6%. Cira Labs, which we announced last quarter is a 50,000 square foot incubator that we are partnering with Pennsylvania Biotechnology Center. Since the announcement we have entered the marketing pipeline and build a significant amount of interest with proposals outstanding for roughly 78% of that space. Within Schuylkill Yards the life science push continues as we've cited previously we can deliver about 3 million square feet of life science space, which we believe creates an excellent opportunity to establish an corollary research community to all the other great activity over here in University City. 3151 Market Street, our dedicated life science building is fully designed and ready to go. We have a leasing pipeline on that still in the 400,000 square foot range. At Broadmoor we are progressing with blockade in the first phase of Block F to recap, the scope of that 250,000 square feet of office and 613 apartment projects at a total cost of about $367 million. We anticipate third quarter closing date on both blocks A and F. Our plan remains to start the residential component of Block A, which is 341 units at $119 million cost in the fourth quarter of 2021, and on Block A office we are actively in the pre-leasing market and would plan to start that as market conditions permit. The first quarter net loss totaled $300,000 or less than one penny per diluted share and FFO totaled $55.9 million or $0.32 per diluted share and in line with consensus estimates. Portfolio operating income totaled $67 million, which was below our estimate by $1 million. Interest expense totaled 55.5 million and was below our first quarter forecast due to higher interest capitalization on our 405 Colorado project. Termination and other income totaled $2.7 million and was $1.7 million above our first quarter forecast, primarily due to two insurance claims generating approximately $1.1 million of other income. We recorded no land gains and minimal tax provision compared to a $1.1 million dollar income guidance for the first quarter. G&A totaled $8.4 million or $200,000 above our $8.2 million first quarter guidance. FFO contribution from unconsolidated joint ventures totaled $6.8 million or $1.3 million above our first quarter estimate. The higher FFO contribution was primarily due to lower net operating cost from expense savings, and a $600,000 termination fee Commerce Square. Our second quarter fixed charge and interest coverage ratios were 4.0 and 3.8 respectively, both metrics decreased slightly from the first quarter. Our second quarter annualized net debt to EBITDA increased to 6.9 and is currently above our guidance range, an increased primarily due to the forecasted lower NOI. Additional reporting item on cash collections as Jerry mentioned, we had a very strong quarter of 99% and tenant write offs totaled less than $100,000 for the quarter. Portfolio changes, as we noted 905 is now completely out of all of our metrics as that building has been taken out of service related to our Broadmoor Master Plan. Looking at third quarter guidance, we anticipate the third quarter results to improve compared to the second quarter based on executing leasing activity and have some other assumptions, our portfolio operating income, we expect that to total $6.85 million and be sequentially higher during the second quarter. Part of that it will be due to the 107,000 square feet of forward leasing activity anticipated to commence during the third quarter and should generate a second consecutive quarter of positive absorption. FFO contribution from our unconsolidated joint ventures were totaled $5.8 million for the third quarter, a $1 million sequential decrease from the second quarter, primarily due to a non-recurring termination fee and incrementally higher net operating expenses, G&A for the third quarter will decrease from 8.4 to 7.5, the sequential decrease is primarily due to the annual equity compensation vesting during the second quarter that will not occur in the third quarter, we expect interest expense to approximate $16 million with capitalized interest of $1.5 million. Termination and other income, we expect to total $2.1 million for the third quarter. Net management and leasing will total $3.2 million and interest in investment income of $2 million. For land gains, we expect about $2.3 million for the quarter based on the two previously mentioned closings and one additional non-core land sale generating total proceeds of $16.7 million. We did close on the $186.7 million construction loan at Schuylkill Yards at the initial rate of 3.7%. Looking at our capital plan, our second quarter CAD was 90% of our common dividend, which is above our stated range. Our second half 2021 capital plan is very straightforward and totals about $245 million with a $120 million of development, $65 million of dividends, $20 million of revenue maintain capital, $30 million of revenue create capital and $9 million of equity contributions to our joint ventures, primarily Schuylkill Yards. The primary sources are cash flow after interest payments of $95 million, $82 million used of our line of credit, using the cash on hand, totaling $48 million, and again, $20 million roughly in land and other sales. Based on that capital plan outlined, our line of credit balance will be approximately $140 million, leaving $460 million of line availability. We still project our range to be 6.3 to 6.5, but as Jerry mentioned that will be predicated on how our development starts occur, and we still see that debt to GAV between 42% and 43%. In addition, we anticipate our fixed charge coverage ratio to be approximately 3.7 and our interest coverage ratio to be about 4.0. And I think we're very pleased that our annual rollover through 2024 is only 7% a year. As I mentioned earlier, our development project pipeline increased by about 23% during the quarter. We have two fully approved mixed use master plan sites that can double our existing portfolio, diversify our revenue stream and drive significant earnings growth, and when you take a look at even it's Schuylkill Yards assuming a start of 3051 markets through with the other projects we have in operation or under construction, that will represent about 5% of our portfolio square feet. And, in addition to life science, our Schuylkill Yards and Broadmoor developments with existing approvals in place can accommodate about 5,000 multifamily units. As Tom touched, we've had a very attractive CAD growth rate over the last 5 years.

In looking at the numbers for the second quarter, we posted FFO of $0.32 per share, which was in line with consensus estimates. The first quarter net loss totaled $300,000 or less than one penny per diluted share and FFO totaled $55.9 million or $0.32 per diluted share and in line with consensus estimates.

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In the U.S., over 40% of the population have received at least one vaccine dose, and most states are now fully or partially reopening with more restrictions being lifted daily. In the U.K., over 50% of the population has received at least one vaccine dose, and their reopening road map is tracking to plan. In the U.K., we have 11 festivals planned this summer, including our largest ones, Reading, Leeds and Parklife, where tickets are already sold out. While we expect the second quarter to be our first year-on-year improvement since Q4 of 2019 and to also be generating positive AOI through the second half of the year, we still plan on reducing costs this year by $750 million and reducing cash spend by $1.5 billion relative to prepandemic plans. Our AOI loss for the quarter was $152 million, which consisted of $323 million in operational fixed costs and $171 million of contribution margin, which included $149 million from operations, along with various onetime items, including insurance recoveries. We ended the first quarter with $1.1 billion in free cash compared to $643 million at the end of 2020, an increase of $462 million. Our free cash, along with $964 million of available debt capacity, gives us $2.1 billion in readily available liquidity, up from $1.6 billion at the end of 2020. Benefiting our free cash position, in January, we raised $417 million of net debt, and we had a $181 million timing benefit, largely associated with deferred revenue classification. Our total free cash usage in the quarter was $136 million or $45 million per month, which included $100 million per month of average operational burn, roughly in line with Q4, plus another $4 million per month of nonoperational cash costs to get us to $104 million average per month in gross burn. And in Q1, we had $59 million average cash contribution margin per month, roughly 50% higher CM than we averaged in Q4. The global refund rate for Live Nation concerts that are rescheduled and are in or have gone through a refund window or windows was unchanged from the prior quarter at 17% through the end of Q1. On our festivals where fans were able to retain their tickets for the next scheduled event, 65% of fans are doing so. On deferred revenue, at the end of the first quarter, event-related deferred revenue for shows that will play in the next 12 months was $1.5 billion, the same as at the end of Q4. Ticket sales in the first quarter were $200 million, but this was offset largely by a shift of deferred revenue from short term to long term for shows that were rescheduled into 2022. Kathy Willard, our CFO for the past 15 years, will be retiring as of June 30. Kathy, as you know, has been an invaluable part of our executive team for the past 15 years and been with Live Nation for over 20.

While we expect the second quarter to be our first year-on-year improvement since Q4 of 2019 and to also be generating positive AOI through the second half of the year, we still plan on reducing costs this year by $750 million and reducing cash spend by $1.5 billion relative to prepandemic plans.

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As always, Lloyd and I are pleased to share our latest financial results and to represent the great work of the more than 28,000 people of Booz Allen. Global Commercial represents 2% of our revenue. And based on this experience, many are interested in flexible models that better serve their missions while reducing the number of people who are 100% on-site. At the top-line, in the first quarter, revenue increased 1.7% year-over-year to $2 billion. Liberty contributed approximately $16 million to revenue growth. Revenue excluding billable expenses grew 1.9% to $1.4 billion. As a reminder, we forecast constrained low single-digit top-line growth in the first half of the year, driven by four dynamics: First, the need to ramp up on contracts and hiring; second, a more normalized utilization rate in the first half of this fiscal year compared to the high staff utilization in the first half of fiscal year 2021, which we believe to be worth roughly 300 basis points of growth. In defense, revenue grew 4.4%, with strong growth in revenue ex billable expenses, partially offset by significant materials purchases in the prior year period. In Civil, revenue grew 6%, led by strong performance in our health business and the addition of Liberty. Revenue from our intelligence business declined 6.4% this quarter. Lastly, revenue in Global Commercial declined 27.4% compared to the prior year quarter. Our book-to-bill for the quarter was 1.3 times, while our last 12-months book-to-bill was 1.2 times. Total backlog grew 16.5% year-over-year, including Liberty, resulting in backlog of $26.8 billion, a new record. Funded backlog grew 1.6% to $3.5 billion. Unfunded backlog grew 91% to $9 billion and price options declined 3.7% and to $14.3 billion. Pivoting to headcount as of June 30th, we had 28,558 employees, up by 1,177 year-over-year or 4.3%. Moving to the bottom line, adjusted EBITDA for the quarter was $238 million, up 11.8% from the prior year period. Those items, along with continued low billable expenses as a percentage of revenue pushed our adjusted EBITDA margin to 12%. First quarter net income decreased 29% year-over-year to $92 million, primarily impacted by Liberty transaction-related expenses of approximately $67 million. Adjusted net income was $146 million, up 12.3% from the prior year period, primarily driven by the same factors driving higher adjusted EBITDA. Diluted earnings per share declined 27% to $0.67 from $0.92 in the prior year period. And adjusted diluted earnings per share increased 15% to $1.07 from $0.93. Turning to cash, cash flow from operations was negative $11 million in the first quarter. Operating cash flow was negatively impacted by approximately $67 million of transaction costs paid in the first quarter, which includes approximately $56 million of cash payment at closing of the Liberty acquisition. These cash payments represent a reallocation of a portion of the overall $725 million purchase price prior to adjustments from investing cash flows into operating cash flows. Capital expenditures for the quarter were $9 million, down $11 million from the prior year period, driven primarily by lower facility expenses. During the quarter, we issued $500 million of 4% senior notes due 2029. Additionally, we extended the maturity of our Term Loan A and revolving credit facility to 2026 and increased the size of our revolver by $500 million to $1 billion of total capacity. During the quarter, we paid out $52 million for our quarterly dividend and repurchased $111 million worth of shares at an average price of $83.91 per share. In total, including the close of the Liberty acquisition, we deployed $889 million. Today, we are announcing that our Board has approved a regular dividend of $0.37 per share, payable on August 31st to stockholders of record on August 16th. Today, we are reaffirming our fiscal year 2022 guidance. We expect total revenue growth to be between 7% and 10%, inclusive of Liberty. We expect adjusted EBITDA margin in the mid-10% range. We expect adjusted diluted earnings per share to be between $4.10 and $4.30 based on an effective tax rate of 22% to 24% and 134 million to 137 million weighted average shares outstanding. ADEPS guidance is inclusive of both Liberty and incremental interest expense from our $500 million bond offering. We expect operating cash flow to grow to $800 million to $850 million, inclusive of the aforementioned $56 million of cash payments related to the Liberty transaction. And finally, we expect capex in the $80 million to $100 million range.

Diluted earnings per share declined 27% to $0.67 from $0.92 in the prior year period. And adjusted diluted earnings per share increased 15% to $1.07 from $0.93. Today, we are reaffirming our fiscal year 2022 guidance.

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This includes the Bank and the Comerica Charitable Foundation, together providing $11 million in assistance to local communities and businesses. We funded $3.9 billion in PPP loans to small and medium-sized companies. , Civic 50, CDP and Corporate Nights. And our net charge-offs for the year were 38 basis points or 14 basis points excluding energy. We maintained our strong capital levels and booked -- our book value grew 7% to over $55 per share. We generated earnings of $215 million or $1.49 per share, a 3% increase over the third quarter, driven by an increase in revenue and strong credit quality. While lower on a quarter-over-quarter basis, average loans increased in December relative to November by nearly $300 million excluding PPP loan repayments. Average deposits increased by nearly $1.5 billion to an all-time high with 55% of the growth derived from non-interest-bearing accounts. Net interest income increased $11 million benefiting from our continued careful management of loan-to-deposit pricing, combined with the contribution from fees related to PPP loan forgiveness. As far as credit, our metrics remained strong and our provision was a credit of $17 million. Criticized loans declined and net charge-offs were only 22 basis points. Positive portfolio migration and the slight improvement in the economic forecast resulted in a reduction of the credit reserve to just under $1 billion or nearly three times non-performing assets. Non-interest income increased $30 million or 5% as customer activity continued to rebound. Our capital levels remained strong. Our CET1 ratio increased to 10.35%, above our target of 10%. Average loans decreased approximately $600 million or 1%, which compared favorably to the industry HA data. Technology and Life Sciences loans declined about $180 million, mainly due to M&A and increased liquidity, driven by fundraising activity and companies reducing cash burn. Equity Funds Services, which provides capital call lines to investment companies increased $244 million as activity has picked up with new fund formation. National Dealer increased $190 million as inventory levels are rebuilding, yet remains $2 billion below fourth quarter 2019. Period end loans were stable and included a decline in PPP balances of $298 million, primarily due to loan forgiveness. Line utilization at year end for the total portfolio remained relatively low at 48%. Average deposits increased 2% or $1.5 billion to a new record of $70.2 billion, as shown on Slide 7. Period end deposits increased over $4.4 billion. Timing of monthly benefit activity in our government prepaid card business increased balances by $2.2 billion at quarter end. With strong deposit growth, our loan-to-deposit ratio decreased to 72%. The average cost from interest-bearing deposits reached an all-time low of 11 basis points, a decrease of six basis points from the third quarter and our total funding cost fell to only 10 basis points. This was due to the third quarter purchase of $2.25 billion in additional securities, primarily treasuries, as we took some action to put some of our excess liquidity to work. The additional securities combined with lower rates on the replacement of prepays, which totaled about $1 billion, resulted in the yield on the portfolio declining to 1.95%. We expect repayments of MBS to continue to be about $1 billion per quarter and yields on reinvestments to be in the low-to-mid 100 basis point range. Net interest income increased $11 million to $469 million and the net interest margin was up three basis points to 2.36%. Interest income on loans increased $6 million, adding four basis points to the margin. Higher fees, mostly related to PPP loan forgiveness and continued pricing actions as loans renew, together added $10 million and four basis points to the margin. Other portfolio dynamics, including higher non-accrual income, added $1 million. The decrease in loans had a $5 million unfavorable impact. Lower securities yields had a $6 million or three basis point negative impact. This was mostly offset by the higher balance, which added $5 million. Average balances of the Fed increased over $500 million, impacting the margin by one basis point. Our extraordinarily high Fed balances of $13 billion continue to weigh heavily on the margin with the gross impact of approximately 43 basis points. Finally, prudent management of deposit pricing added $5 million and three basis points to the margin and lower rates on wholesale funding added $1 million. Gross charge-offs were only $39 million, a decrease of $14 million from the third quarter. Net charge-offs were $29 million or 22 basis points. Non-performing assets increased $24 million, yet remained below our historical norm at 69 basis points of total loans. Criticized loans declined $459 million and comprised 6% of the total portfolio. As the path to full economic recovery remains uncertain due to the unprecedented challenges of the COVID-19 pandemic, our reserve ratio remains elevated at 1.90% or 2.03%, excluding PPP loans. Criticized loans were stable and non-accruals remain under 1%. This segment has performed better than expected, but issues can be lumpy and sudden and resulted in net charge-offs of $21 million in the fourth quarter. Energy loans decreased 13% to $1.6 billion at quarter end, representing 3% of our total loans. Non-interest income increased $13 million, as outlined on Slide 12, continuing the positive trend we've seen since post the shutdown of the economy earlier last year. Customer derivative income increased $8 million with higher volume due to interest rate swaps and energy hedges, combined with the change in the impact from the credit valuation adjustment. Specifically, there was an unfavorable adjustment of $6 million in the third quarter and a favorable adjustment of less than $1 million in the fourth quarter. Commercial lending fees increased $5 million with the seasonal pickup in syndication activity and higher unutilized line fees. Securities trading income, which includes fair market adjustments for investments we hold related to our Technology and Life Sciences business, decreased $5 million from elevated levels generated over the last couple of quarters. Note, deferred comp asset returns were $9 million, a $1 million increase from the third quarter and are offsetting non-interest expenses. Salaries and benefits increased $14 million with higher performance-based incentives, severance, staff insurance expense and technology-related labor. We realized a $7 million increase in outside processing due to card activity, technology spend as well as PPP program costs. Occupancy increased $2 million due to a catch-up in maintenance projects that were delayed due to COVID as well as seasonal expenses. Our CET1 ratio increased to an estimated 10.35%, above our target of 10%. However, this will be more than offset by Mortgage Banker declining from its record high due to seasonally lower purchase and refi volumes. We are currently in the process of deploying some excess liquidity by repaying $2.8 billion of FHLB advances over an eight week period, which will provide a modest lift. However, with our credit reserve at year end at over 2% of loans, excluding PPP, we believe we are well positioned to manage through this period of economic uncertainty. Our pension expense is expected to decline $9 million in the first quarter to get to the new run rate for 2021. As I mentioned, we do not forecast deferred comp of $9 million to repeat. We expect a 22% tax rate, excluding discrete items. This has been demonstrated by our ROE, which increased over 11% in the fourth quarter and our book value per share, which grew 7% over the past year as well as the current dividend yield, which remains above 4%.

We generated earnings of $215 million or $1.49 per share, a 3% increase over the third quarter, driven by an increase in revenue and strong credit quality. Criticized loans declined and net charge-offs were only 22 basis points. Our capital levels remained strong. Net interest income increased $11 million to $469 million and the net interest margin was up three basis points to 2.36%. However, this will be more than offset by Mortgage Banker declining from its record high due to seasonally lower purchase and refi volumes.

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And we delivered strong consolidated non-GAAP operating margin of 9.5%, including another profitable quarter for Joybird. In addition, our strong cash generation enabled us to return more than $7 million to shareholders through dividends and share repurchases and we declared an increase in the dividend to 15% -- to $0.15 per share. Across the La-Z-Boy Furniture Galleries network written same-store sales increased 6.3% in the quarter of the strongest momentum in January. This is on top of last year's third quarter written same-store sales increasing 10.5%. And for some additional context, stripping out the Canadian stores that were closed at various points during the third quarter due to COVID restrictions, written same-store sales would have increased to 8.2% for the network. Written same-store sales for fiscal '21 year-to-date increased 18%. And for calendar year 2020 written same-store sales with the La-Z-Boy Furniture Galleries network increased 6% and the average revenue per store increased to $4.4 million from $4.1 million in calendar '19. During the quarter, our wholesale backlog grew to over $600 million, 4.5 times what it was at the end of Q3 last year, and up another 25% since the second quarter. However, delivered sales declined 4% to $351 million, reflecting the COVID-19 production and delivery challenges and a change in mix, as I detailed a moment ago. Non-GAAP operating margin for the wholesale segment was 10.2%, reflecting the temporary COVID impacts to our supply chain and increased cost to expand manufacturer capacity, as well as for raw materials. For the quarter delivered sales decreased 1% to $166 million, reflecting the COVID-related product delays. However, written same-store sales for the company-owned stores increased 9% with the strongest momentum in January, reflecting positive trends across all sales metrics, including traffic, conversion and average ticket by increased in both three units and design sales. For the period delivered same-store sales decreased 6.3%. Non-GAAP operating margin for the segment was 8.9% slightly down from 9.8% in last year's comparable quarter, primarily related to lower delivered sales relative to fixed cost and higher selling expenses driven by commissions paid on increased written sales, partially offset by decreased spending for the market -- for marketing given the strong demand environment and some lower travel-related spending due to COVID restrictions. For fiscal '21 and 2022 each year will include more than 20 projects and they will be completed across the network with more than half of them in our company-owned retail. Sales for the second quarter, which are reported in corporate and other increased 30% to $29 million. Written sales increased 79% in the quarter versus the prior year, reflecting ongoing strong demand trends and the strength of the brand in the online marketplace. And one last note before turning over the call to Melinda, last week we announced the expansion of our Board of Directors to 10 members with the addition of Jim Hackett, he currently serves as a Special Advisor to Ford Motor Company and was President and CEO of Ford from 2017 to 2020. Last year's third quarter non-GAAP results exclude purchase accounting charges of $1.4 million pre-tax or $0.02 per diluted share. A charge of $6 million pre-tax or $0.10 per diluted share related to an impairment for one investment and a privately held start-up company and income of $8.7 million pre-tax or $0.14 per diluted share related to the Company's supply chain optimization initiative, which included the closure of our Redlands, California facility and relocation of our Newton, Mississippi leather cut-and-sew operation. On a consolidated basis fiscal '21 third quarter sales decreased 1.2% to $470 million, primarily due to temporary supply chain impacts from COVID-19. Consolidated non-GAAP operating income was essentially flat at $45 million versus last year's quarter and consolidated non-GAAP operating margin improved to 9.5% versus 9.4%, mainly driven by strong performance by Joybird. Non-GAAP earnings per share was $0.74 per diluted share in the current quarter versus $0.72 in last year's third quarter. Consolidated gross margin for the third quarter increased 60 basis points, changes in our consolidated sales mix, primarily driven by the growth of Joybird, which carries a higher gross margin than our wholesale businesses drove the biggest change in margin. SG&A as a percent of sales increased 50 basis points, primarily reflecting the changes in our consolidated sales mix, due to growth in Joybird, which carries higher SG&A costs than our wholesale businesses. And non-operating income in the quarter was primarily due to unrealized gains on investments and contributed $0.02 per diluted share to earnings per share in the third quarter on both a GAAP and a non-GAAP basis. Our effective tax rate on a GAAP basis for fiscal '21 third quarter was 27.7% versus 26% in last year's third quarter. Our effective tax rate varies from the 21% federal statutory rate, primarily due to state taxes. For the full fiscal '21 year, absent discrete items, we estimate our effective tax rate on a GAAP basis to be between 26% and 27%, and on a non-GAAP basis we estimate it will be in the range of 24% to 25% after adjusting out the effects of the non-deductible Joybird contingent consideration. Turning to cash, year-to-date we generated $250 million in cash from operating activities, reflecting strong operating performance and a $122 million increase in customer deposits and orders for the Company's retail segment and Joybird. We ended the period with $393 million in cash, more than doubled our $168 million in cash at the end of last year's third quarter. In addition, we held $31 million in investments to enhance returns on cash, compared with $30 million last year. Year-to-date, we have invested $27 million in capital, primarily related to investments in our retail stores, new production capacity in Mexico, machinery and equipment and upgrades to our Dayton, Tennessee manufacturing facility, which have now been completed. As we make investments in the business to strengthen the company for the future, we expect capital expenditures in the range of $35 million to $40 million for the full fiscal year, which will include investments in new manufacturing capacity in Mexico, technology upgrades, improvements to retail store facilities and technology and upgrades to our Neosho, Missouri manufacturing facility. Regarding cash return to shareholders fiscal year-to-date, we paid $9.7 million in dividends to shareholders and spent approximately $1 million purchasing 22,000 shares of stock in the open market, since reinstating our program in December under our existing authorized share repurchase program, leaving 4.5 million shares of purchase availability in the program. And yesterday, our Board of Directors increased the quarterly dividend to $0.15 per share, demonstrating its confidence in the strength of our business. First, I remind you that our effective non-GAAP adjustments for the fourth quarter will include purchase accounting and related tax adjustments for acquisitions to-date, which are expected to be a $0.02 per share benefit in the fourth quarter. Second, I remind you that last year's fourth quarter included a one-time $16 million benefit in cost of sales for the rebate of previously paid tariffs, which was included in both our GAAP and non-GAAP results and which was mostly offset by a bad debt expense of $13.5 million, due to the Art Van Furniture bankruptcy and a provision for potential credit losses in the COVID-19 environment also included in both our GAAP and non-GAAP results. Our non-GAAP results for last year's fourth quarter excluded a non-cash, non-tax deductible Joybird goodwill impairment charge of $27 million, mostly related to the future financial projections at the beginning of the pandemic, and a $6 million pre-tax benefit from purchase accounting, primarily related to the reversal of the Joybird contingent consideration liability by its full carrying value also based on financial projections at that time. Considering all of these factors, we now expect fiscal '21 fourth quarter consolidated sales growth of 34% to 39% versus the prior year fourth quarter, which included the month long pandemic shutdown. We expect non-GAAP consolidated operating margin at the lower end of the 9% to 11% range. For some perspective in March of 2009, our market cap was around $30 million and now is approaching $2 billion.

Across the La-Z-Boy Furniture Galleries network written same-store sales increased 6.3% in the quarter of the strongest momentum in January. For the period delivered same-store sales decreased 6.3%. Non-GAAP earnings per share was $0.74 per diluted share in the current quarter versus $0.72 in last year's third quarter. Considering all of these factors, we now expect fiscal '21 fourth quarter consolidated sales growth of 34% to 39% versus the prior year fourth quarter, which included the month long pandemic shutdown.

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